UK mortgage activity steadied in December as house purchase approvals slipped but remortgaging gathered pace, latest Money and Credit data from the Bank of England reveals.
Net borrowing of mortgage debt by individuals was unchanged at £4.6 billion, pointing to a stable flow of new lending after the volatility seen earlier in 2025.
Gross mortgage lending eased by £0.5 billion to £23.0 billion, while gross repayments fell by £0.6 billion to £18.8 billion, leaving overall net lending flat.
The annual growth rate for net mortgage lending held at 3.4%, reinforcing the picture of a market moving sideways rather than accelerating.
Net mortgage approvals for house purchase fell by 3,100 to 61,000 in December, suggesting some softening in buyer demand at the end of the year.
By contrast, approvals for remortgaging rose by 1,600 to 38,400, highlighting growing borrower focus on refinancing as rates begin to edge down and more fixed-rate deals approach maturity.
LOWER RATES
The effective interest rate on newly drawn mortgages fell to 4.15% from 4.20% in November, while the rate on the outstanding stock of mortgages ticked up slightly to 3.92% from 3.90%.
Net borrowing of consumer credit fell to £1.5 billion from £2.1 billion, with credit card borrowing down to £0.7 billion. Even so, annual growth in consumer credit remained elevated at 8.2%, with credit card balances growing at 12.4%, close to recent highs.
INDUSTRY REACTION
Richard Merrett, managing director at Alexander Hall, said: “A small dip in mortgage approvals during December is to be expected and is simply a reflection of market seasonality in the lead up to Christmas, rather than an early sign of declining market sentiment.
“However, the bigger picture remains encouraging, particularly when you compare current market conditions to a year ago. Rates are lower, affordability has improved, and the average buyer is now around £1,000 a year better off when it comes to the cost of their mortgage repayments.
“With lenders continuing to offer more flexibility and stronger affordability assessments, this seasonal dip is likely to be short lived and, as activity picks back up, we expect approvals to follow suit.”
SUSTAINED RECOVERY
Simon Gammon, managing partner, Knight Frank Finance, said: “Activity in the housing market remained tepid between the Budget and Christmas, even though the measures announced were predominantly positive for the mortgage market.
“The stability of long term borrowing costs following the Chancellor’s speech and increasing competition among lenders paved the way for two months of falling mortgage rates, and the best fixed rates now sit at 3.5%.
“Early year indicators suggest that buyers have returned in greater numbers in the new year. Measures of asking prices and sentiment among estate agents have risen quickly, teeing up a more sustained recovery as we move towards the spring.”
LENDERS WANT TO LEND
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “While mortgage approvals dipped in December, the underlying resilience of the housing market has been in evidence now that the Budget is out of the way.
“The effective interest rate paid on new mortgages fell to 4.15% but the rate on the outstanding stock of mortgages increased slightly to 3.92%, highlighting that affordability remains a concern for many.
“As we move towards spring, 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 and while some have increased pricing in recent days, we expect rates to jump around, rather than significantly move one way or another.
“Remortgaging numbers rose, suggesting that borrowers coming off low rates are shopping around for the best rate possible rather than opting for the ease of sticking with their existing lender.”
IMPROVING AFFORDABILITY
Karen Noye, mortgage expert at Quilter, said: “There are early signs of easing on pricing, with the effective rate on newly drawn mortgages edging down to 4.15%. Markets are currently pricing in the potential for two or three base rate cuts over the course of this year. If that materialises, mortgage rates should gradually drift lower, which could improve affordability and encourage more people to move.
“Even small reductions can make a meaningful difference to monthly repayments and stress test calculations.
“Unsecured borrowing remains elevated. Although net consumer credit fell back in December, annual growth is still running at 8.2%, with credit card borrowing growing at over 12% year-on-year. With credit card rates above 21%, this is expensive debt and highlights the ongoing pressure on household budgets.
BUILD MORE HOUSES
Emma Cox, MD of Real Estate at Shawbrook, said: “Mortgage approvals fell in December, in line with the seasonal drop-off we usually see that time of year – though there other factors are in play.
“Potential buyers may have been more reserved in hope for better deals this side of the new year, but it could also be that a certain demographic of those who can afford to buy, such as landlords and higher-earners, are simply taking a step back due to increasing costs and stricter legislations.
“While it’s important to make homeownership accessible to all, the solution lies in increasing housing stock through building, rather than hammering down on landlords. “The rental market is crucial for many, especially in cities like London where house prices do not align with median income.
“Landlords are an important piece of this puzzle, and support is necessary, especially once the Renter’s Rights Bill comes into effect in May, presenting a novel situation for the market.”
BUDGET HIT
Tomer Aboody, director of specialist lender MT Finance, said: “As net mortgage approvals reduce in December, the market is feeling the hit from the Chancellor’s Budget along with the lack of constant support for the market.
“Some encouragement from the government would be timely, perhaps in the form of reducing or reforming stamp duty, encouraging more people to transact. While interest rate reductions are helpful in encouraging activity, on their own they may not be enough to significantly boost transaction numbers.”
SEASONAL BLIP
Richard Pike, chief sales and marketing officer at Phoebus Software, said: “The latest Money and Credit figures from the Bank of England showed mortgage borrowing in December remained flat compared to the previous month.
“There were a number of factors in play – while the base rate reduction and falling mortgage rates stimulated competition, the housing market tends to slow down in the run-up to Christmas.
“This could explain why net mortgage approvals for house purchase fell, while approvals for remortgaging rose for a second month.
“With falling rates and improving affordability, I’m optimistic that we’ll see mortgage approvals steadily rising in the coming months.”
LENDERS NEED TO STAY VIGILANT
Melanie Spencer, growth director at Target Group, said: “A significant drop in mortgage approvals in December shouldn’t be too much of a surprise, particularly when you factor in the usual seasonal lull, along with a very late Budget.
“This created a pent-up demand which is already starting to work its way through as many parts of the market report a positive start to 2026.
“Likely buoyed by the base rate cut in December and predictions of both two more cuts and improving inflation, lenders have been very active in this early part of the year. While some affordability and deposit pressures remain, the lending landscape is in good health with high levels of product choice – particularly in high LTV brackets.
“Lenders will continue to fill their pipeline for the coming year.”
“Lenders will continue to fill their pipeline for the coming year and look to meet their own lending targets and ambitions for market share.
“It comes as reports suggest that affordability is on course to return to more manageable levels. It means that barring any economic of geopolitical shock – which is an increasing threat in the current climate – we should be in store for a really positive year.
“Given the current factors in play at home and abroad – along with increasing choice at the higher end of the mortgage market – there’s no doubt that lenders need to stay vigilant. Not only does it place greater importance on efficient, scalable and tech-enabled solutions and processes, but it places fresh emphasis on servicing and ensuring that lenders have the right capabilities in place – either in-house through digital transformation or outsourced to the right partners.”
