Mortgage approvals for house purchase rose to 58,200 in June, up from 56,565 in May, according to Bank of England figures published this week. The rebound is real but modest, and it sits well below the six month average of roughly 61,435.
At the same time, borrowing has been getting more expensive. Moneyfacts data puts the average rate on a new mortgage at 5.59% on 29 July, up from 4.9% in March. Approvals recovering while rates climb is an unusual combination, and it tells you something about the mood among buyers.
Jeremy Leaf, the north London agent and former RICS residential chairman, put it well. “The stop-start war in Iran is continuing to have a knock-on effect on mortgage rates and the cost of living compounded by recent domestic political upheaval,” he said. “Therefore, it may be a little surprising that the always reliable indicator of future market activity, mortgage approval numbers, have bounced back, but not to us. On the ground, we’re not seeing a significant change in sentiment. On the contrary, there’s a grim determination among most to stay the course despite some serious price negotiations in many cases.”
That phrase, grim determination, captures the current market better than any index. Buyers are transacting. They are also negotiating hard, and taking their time about it.
Nathan Emerson, Chief Executive at Propertymark, read the June figures as buyers responding to “a period of relative economic stability”, while noting that approvals “remained below the average recorded over the previous six months, indicating that while confidence may be improving, activity has yet to fully recover”.
The detail from Moneyfacts is worth sitting with. The average two-year fix rose from 4.84% in March to 5.68% in June before easing slightly to 5.62% by 29 July. Five-year fixes moved from 4.96% in March to 5.66% at the end of July. Ten-year fixes sit at 6.21%. Lenders have been repricing in response to swap market volatility, not to any change in the base rate.
Standard variable rates have been pinned at 7.13% since March. That leaves anyone sitting on a reversion rate paying roughly 1.5 percentage points more than a borrower taking a new fixed deal.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, was blunt about the risk of waiting. “Interest rates are expected to stay higher for longer and those who delay locking into a fixed rate mortgage could pay the price,” she said. Her arithmetic on the SVR gap is stark: moving off an expensive revert rate onto a five-year fix could save around £2,800 a year.
Springall’s figures give useful scale to the risk. On a typical £250,000 mortgage over 25 years, a 0.25 percentage point rise adds around £450 a year. A half point adds around £900.
Those numbers land differently across our region. A £250,000 mortgage is close to a mainstream purchase in Great Yarmouth or Thetford. In Burnham Market or Southwold, where a family house frequently requires borrowing at twice that level, the same percentage movement carries double the cash consequence.
The squeeze is sharpest at the bottom. The average five-year fix at 95% loan to value has pushed above 6%, reaching 6.07%. Springall’s view is that saving to 10% changes the equation materially: “First-time buyers who can save a 10% will not only have more purchasing power, but they will also widen the choice of cheaper mortgage rates.” On a £250,000 loan over 25 years, that is roughly £600 a year saved compared with a 5% deposit buyer.
Lenders have responded with 98% products and £5,000 deposit schemes, which help with access rather than with cost. The rate premium for a thin deposit remains substantial.
Richard Donnell, Executive Director at Zoopla, connected the threads. “Fewer housing sales being agreed means less demand for mortgages which explains the 10% decline in mortgage approvals on last year,” he said. “Average mortgage rates started the year at 4% and are currently around 4.75% adding more than £1,500 a year to the cost of buying an average priced home.” Zoopla expects sales to finish the year 6 to 8% below 2025, citing buyer choice, political uncertainty and, less predictably, the World Cup.
Note the discrepancy between Zoopla’s 4.75% and Moneyfacts’ 5.59%. The former tracks rates actually drawn down, weighted towards lower loan-to-value remortgages. The latter is an average of products on shelf. Both are correct, and the gap is a reminder that the rate a specific buyer achieves depends heavily on deposit, credit profile and lender appetite.
Higher rates with recovering approvals produces a particular kind of market: buyers who are present, funded and unhurried. They have choice, they have bargaining power, and they use both. Leaf’s “serious price negotiations” is exactly what we see in practice on properties that come to market with an aspirational figure attached.
The practical consequence is that pricing precision matters more than it did 18 months ago. A property priced correctly finds its buyer. One priced hopefully absorbs the negotiation instead, usually ending lower than a realistic opening figure would have achieved. Our location market reports exist to make that judgement on evidence rather than instinct.
For buyers, the message from the data is less ambiguous than usual. Rates have risen four consecutive months on the strength of swap markets alone. Waiting for a return to 4% deals is a bet against the entire forward curve, and it isn’t a bet the numbers currently support.
