Residential mortgage approvals decreased to 56,200 in May, from 66,000 in April, the latest Money and Credit data from the Bank of England shows.
This was below the average of 63,300 over the previous six months, and the lowest since December 2023 (52,600).
Approvals for remortgaging with a different lender also decreased, to 33,300 in May, from 51,200 in April.
The dip in approvals comes as the average interest paid on newly drawn mortgages increased to 4.22% in May, from 4.08% in April. The rate on the outstanding stock of mortgages was unchanged from April, at 3.92% in May.
Net mortgage borrowing decreased to £2.9 billion in May, from £4.4 billion in April. This was below the previous six-month average of £5.1 billion, and the lowest since May 2025.
Gross lending decreased slightly to £27.1 billion in May, from £27.4 billion in April, but remains above the six-month average of £25.3 billion. By contrast, repayments increased slightly in May, to £22.9 billion, from £22.6 billion in the previous month.
Simon Gammon, managing partner at Knight Frank Finance, commented: "The uncertain economic outlook and mounting pressure on household finances caused a sizeable drop in mortgage lending to homebuyers during May. Leading fixed mortgage rates sat just above 4.5% during the month, up from around 3.5% before the conflict in the Middle East began.
"The property market remained fairly resilient through March and April, with mortgage lending running in line with long-run averages, but May's data provided the first signs that a larger number of borrowers were beginning to sit on their hands. That's unsurprising given the uncertain outlook for inflation, the rising cost of living and weaker consumer confidence. The property market is particularly vulnerable during periods of uncertainty because of high transaction costs – buyers often find it difficult to justify paying stamp duty.
"Conditions have improved since. The agreement between the US and Iran announced in mid-June prompted oil prices to fall sharply, easing inflation expectations and prompting a series of rate cuts by the major high street lenders. Should that agreement hold, mortgage rates could ease further through the summer, setting the stage for a recovery in the autumn. However, domestic political uncertainty around the incoming prime minister's policy agenda remains a clear risk."
Ian Futcher, financial planner at Quilter, said: “This latest set of Bank of England data points to a clear slowdown in housing activity through May, with both borrowing and approvals falling back sharply. This suggests that demand is being pushed out as households hold back on making long-term financial commitments.
“It is important to view these figures in context though. The May data captures a period when there was still significant uncertainty around whether a ceasefire in the Iran conflict would materialise. That backdrop has weighed heavily on confidence, particularly in a market as sensitive to interest rate expectations as housing. For many prospective buyers, heightened geopolitical risk translates into concerns about inflation, energy prices and ultimately borrowing costs, which is leading to decisions being delayed rather than cancelled outright.
“Looking ahead, much will depend on whether the current ceasefire proves durable. Recent flare ups have already cast doubt on how long it can hold, and that uncertainty will continue to feed through into mortgage pricing in the near term. However, if tensions do ease more sustainably, we would expect a gradual drift down in mortgage rates as markets reassess the inflation outlook. That in turn should help unlock some of the demand that is currently sitting on the sidelines.
“For now, affordability remains stretched and timing the market remains difficult. Borrowers should keep their options under review and be prepared to act when conditions improve, particularly as even modest moves in mortgage pricing can have a meaningful impact on overall borrowing costs.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, commented: “Mortgage approvals dropped to their lowest level since December 2023 in May, illustrating the concerns and difficulties facing buyers and sellers.
“The effective interest rate paid on new mortgages jumped to 4.22% while the rate on the outstanding stock of mortgages was unchanged at 3.92%. However, while averages have crept up on the former, the picture on the ground is more encouraging as funding costs move around and lenders compete for business. As some lenders ease rates, borrowers who see a product they like the look of would be wise to secure it, as volatility means nothing should be taken for granted.
“Remortgaging numbers also fell, suggesting that borrowers may be opting for the ease of sticking with their existing lender when coming to the end of their current deal, rather than shopping around for a new one with a different lender.”
Verona Frankish, CEO of Yopa, added: “A decline in mortgage approvals is unlikely to dampen the wider recovery we're seeing across the housing market. Monthly variation is expected and the housing market rarely moves in a straight line.
"The bigger picture remains encouraging. We've seen demand strengthen steadily this year, supported by more competitive mortgage rates and a growing sense of stability. Buyers have become far more willing to press ahead with their plans, recognising that waiting for cheaper borrowing costs may no longer be worthwhile.
"While approval numbers may ebb and flow, the underlying market remains resilient. With lenders continuing to compete for business and expectations of further monetary easing still in place, we're confident buyer activity will remain healthy throughout the second half of the year.”
