Mortgage borrowing slowed in October as UK households retrenched and businesses sharply cut back on debt according to the Bank of England’s latest Money and Credit report.
The figures suggest that higher-for-longer interest rates and subdued economic confidence continue to weigh on credit demand across the economy.
Net mortgage borrowing eased to £4.3 billion in October, down from £5.2 billion in September.
Mortgage approvals – a leading indicator of housing market activity – also slipped. Approvals for house purchases declined marginally to 65,000, while remortgage approvals fell more sharply to 33,100, the lowest level since February.
Gross lending edged down to £24.5 billion, while repayments rose to £22.1 billion. Annual mortgage lending growth held at 3.2%, the strongest rate since early 2023.
MORTGAGE PRICING EASING
The slowdown comes despite further easing in mortgage pricing. The average effective rate on newly drawn mortgages dipped to 4.17%, its lowest since January 2023, extending the downward trend that began in the spring. Rates on outstanding mortgage balances were unchanged at 3.89%.
Consumer credit growth also cooled for a second month. Net borrowing fell to £1.1 billion from £1.4 billion, with both credit card borrowing and personal loans weakening. Annual consumer credit growth remained at 7.2%, though credit card lending is still expanding at more than 10%.
Households, meanwhile, continued to funnel cash into savings, depositing an additional £6.8 billion in October.
Most of the inflows went into interest-bearing sight deposits and ISAs, while withdrawals from non-interest-bearing accounts offset some of the rise. The effective rate on new time deposits ticked up to 3.84%.
BRIGHTER OUTLOOK
Emma Cox, MD of Real Estate at Shawbrook, said: “Mortgage approval figures stalled in October, likely due to a mix of typical seasonal trends as well as reluctance to make any sudden moves until post Autumn Budget.
“However, looking ahead to 2026, the outlook may be considerably brighter for committed property investors.
“While the announced 2% tax increase on personal property income is likely to put further pressure on so-called ‘dinner-party landlords’ – those operating small, individual portfolios – the impact on professional landlords should be far more muted.
“Many established investors have already structured their operations through limited companies, where the effects of these changes are significantly reduced.”
FAVOURABLE ENVIRONMENT
She added: “As a result, the new tax landscape is unlikely to hinder growth strategies for well-capitalised, business-led landlords who take a long-term, strategic approach to portfolio expansion.
“In fact, with reduced competition from smaller private landlords and ongoing demand for high-quality rental stock, 2026 could present a more favourable environment for professional investors looking to scale.”
“A change of Chancellor would give the market a boost.”
Tomer Aboody, director of specialist lender MT Finance, added: “Lower mortgage approvals further point to little confidence in the Government, a sentiment which was reinforced in the Budget with its lack of help for mortgage borrowers or households.
“At a time when confidence and stability is needed, further taxes affecting buy-to-let landlords will not help the market.
“We await to see whether we will have a change in Chancellor soon, which could give the market a much-needed positive boost.”
DECISIONS PUT ON HOLD
Ian Futcher, financial planner at Quilter, said: “The latest Money and Credit data show that households were putting major financial decisions on hold while waiting for clarity on housing policy.
“In October, net mortgage borrowing by individuals fell back to £4.3 billion, down from £5.2 billion in September. Net mortgage approvals for house purchase slipped to 65,000, and remortgage approvals dropped to 33,100, which is the lowest since February.
“This slowdown reflects the uncertainty surrounding housing-related reforms in the run up to the budget, which led many would-be buyers and movers to sit on their hands until they knew how the changes might affect them.
“The data tells the story of a market temporarily subdued by policy uncertainty.”
“Overall, the data tell the story of a market temporarily subdued by policy uncertainty rather than a lack of demand.
“With the budget now behind us, the housing market should gradually regain its footing, although the recovery is likely to be steady rather than swift as households continue to balance their spending, borrowing and saving decisions carefully alongside relatively high interest rates.”
CHALLENGING MARKET
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “With mortgage approvals dipping slightly in October, the underlying resilience of the housing market is in evidence despite many challenges facing it.
“The effective interest rate paid on new mortgages fell to 4.17 per cent in October and since then, we have seen some lenders trim their mortgage rates further. However, with the rate on the outstanding stock of mortgages unchanged at 3.89 per cent, affordability remains a concern for many.
“The good news for borrowers is that lenders are keen to lend and have the funds available to do so. Many of the big lenders have reduced their mortgage rates in recent days as they look to pick up more business before the year end.
“Remortgaging numbers fell, suggesting that borrowers may be sticking with their existing lender and refinancing rather than going through the hassle of another mortgage application with a new lender.”
POLICY LEAKS STALLED MARKET
Simon Gammon, Managing Partner, Knight Frank Finance, said: “Mortgage approvals for house purchases dipped in October as speculation mounted over which tax rises would be announced in the November budget.
“The steady drip of policy leaks weighed heavily on sentiment.
“That said, the fall in approvals was small. Monthly transaction activity has been broadly in-line with pre-pandemic levels since the summer, which is a display of resilience given the weakening economy and the uncertain fiscal outlook.
“Aspects of that uncertainty have now passed and the Bank of England looks on course to cut the base rate in December. This should allow lenders to keep trimming mortgage rates, and we expect some pent up demand to be released as we move into a stronger spring selling season.”
DEMAND WILL REBOUND
Richard Donnell, executive director at Zoopla, said: “Demand for mortgages to buy homes fell in October, as uncertainty around property tax announcements in the Budget stalled activity in the housing market.
“Mortgage approvals are back to their 5-year average, which points to housing sales of 1.15m a year, and now that the threat of additional property taxes has been lifted from homes between £500,000 and £2m, we expect to see a rebound in demand as we enter the early months of 2026.”
BUDGET SPECULATION DIDN’T HELP
Nathan Emerson, CEO of Propertymark, said: “Speculation surrounding the Autumn Budget may have played a role in contributing towards a decrease in the number of mortgage approvals during this period.
“While it is understandable to see a lull regarding mortgage activity on the months leading up to the Chancellor making their fiscal plans known, it is now time to concentrate on ensuring the housing market is fully empowered for already anticipated population growth, via assembling a skilled workforce and supply chain to deliver on housing targets across each nation in what is already demanding timeframe to achieve.”
THE BIGGER PAUSE, THE LARGER RE-SET
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “It’s clear from these figures that speculation about the Chancellor’s Budget took its toll.
“On the ground, we are seeing plenty of resilience and a determination to keep transactions running even though they are becoming more protracted and often subject to some tough renegotiating. Affordability is gradually improving, especially as another, earlier base rate cut is more likely.
“We have often found in similar circumstances that the bigger the pause, the larger the re-set. As a result, we are expecting a rebound over the next few weeks and a more sustained recovery in early 2026 based on what buyers and sellers have been telling us recently.”
