Borrowers also delay decisions amid tax and rate concerns
Uncertainty around last week’s Autumn Budget coincided with a slowdown in mortgage lending and approvals in October, as borrowers delayed decisions amid speculation over fiscal policy and tax changes.
Latest Bank of England data show that net mortgage borrowing by individuals fell to £4.3 billion in October from £5.2 billion in September, while activity in both home purchase and remortgage markets weakened.
Gross lending edged down to £24.5 billion in October, compared with £24.8 billion a month earlier, at the same time as gross repayments rose by £1.5 billion to £22.1 billion. The annual growth rate of net mortgage lending remained at 3.2%, unchanged from September and still the strongest pace since January 2023, when it stood at 3.4%.
The latest Money and Credit report from the Bank of England also showed a dip in net approvals for house purchase, a key forward indicator of lending volumes, decreased by 600 to 65,000 in October. Approvals for remortgaging with a new lender fell more sharply, down 3,600 to 33,100, the lowest level since February 2025 when they totalled 32,900. The figures suggest that borrowers are holding back ahead of further clarity on the policy and rate outlook.
Pricing continued to ease. The effective rate on newly drawn mortgages declined to 4.17% in October from 4.19% in September, reaching its lowest level since January 2023, when it was 3.88%. This extends the downward trend in new mortgage rates that has been in place since March 2025. The rate on the existing stock of mortgages was unchanged at 3.89% for the third consecutive month, indicating slower adjustment on lenders’ back books.
For brokers and lenders, the combination of weaker approvals and modestly lower rates points to a market constrained more by confidence than pure affordability, with many clients waiting to see how fiscal and monetary policy develop into year-end.
“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,” said Tomer Aboody (pictured top left), director at specialist lender MT Finance.
“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.”
Nathan Emerson (pictured top right), chief executive of industry body Propertymark, also pointed to the impact of Budget speculation on borrower behaviour. “Speculation surrounding the Autumn Budget may have played a role in contributing towards a decrease in the number of mortgage approvals during this period,” he said.
“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.”
For Paul Matthews (pictured top right), senior director of risk at Broadstone, the weaker lending figures also reflected caution ahead of potential tax changes, even as markets anticipate further monetary easing.
“Markets firmly expect another rate cut from the Bank of England in December which would take the rate below 4% and could boost affordability for home buyers as we approach the end of the year,” Matthews said.
“The worst is also likely to behind us in terms of further tax-raising measures which should provide forward stability for financial planning. Nonetheless, we are not expecting a significant reduction in rates to pre-pandemic levels and budget pressures remain tight for millions of households so lenders will still need to exercise caution around affordability.”
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