Residential mortgage approvals totalled 61,013 in December, down 4.8% from November and 8.4% below the 66,634 seen in December 2024, according to the latest figures from the Bank of England.
A decline was expected due to market slowdown at the end of the year, however there is still optimism for a return to growth in the coming months, especially if rumoured bank rate cuts materialise.
In addition, approvals for remortgaging with a different lender rose by 1,600 to 38,400 in December, setting the scene for a busy remortgage market in 2026.
The average interest rate paid on newly drawn mortgages fell to 4.15% in December from 4.20% in November.
Richard Merrett, managing director of Alexander Hall, commented: “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.”
Jonathan Samuels, CEO of Octane Capital, said: “A modest dip in mortgage approvals during December should be viewed in the context of the time of year and while Autumn Budget uncertainty had been removed by this point, the festive period naturally slows decision-making and transaction progression.
"What’s far more important is the underlying improvement in market conditions compared to the same point last year. Inflation has remained under control, borrowing costs are lower, and affordability has strengthened, all of which has helped to support buyer confidence.
"As we’ve entered the new year, these foundations suggest that any softness seen in December is likely to be short lived, with activity expected to pick up as momentum builds through the early part of the year.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, added: “Transaction numbers slipped slightly in December but now that the Budget is out of the way, buyers and sellers who may have put decisions on hold are pressing ahead with their plans.
“We have seen a strong level of enquiries since then, with application levels very similar to last January’s.
“Lenders are doing their bit to encourage activity with a number trimming their mortgage rates this month although we have seen some increases as Swap rates, which underpin the pricing of fixed-rate mortgages, have edged upwards. December’s increase in inflation means that another base rate cut from the Bank of England at next week’s meeting is unlikely but longer term, further reductions are expected as inflation eases.
“With mortgage pricing expected to edge up and down in coming weeks, borrowers would be sensible to plan ahead and book a rate in advance of when they need it. If rates have fallen when they come to take out the mortgage, they should be able to move onto a cheaper rate at that time; if they have risen, they will be pleased they secured a rate when they did."
