Home-buyer mortgage approvals fall to lowest level in more than two years

Sarah Coles, head of personal finance at AJ Bell, reacts to the Bank of England’s latest Money and Credit report.

She said: “The summer holidays are always more of a time for spending than for saving, so it’s hardly surprising a significant chunk of cash was withdrawn from easy access accounts to cover the cost of sun cream and holiday clubs.

“Meanwhile, weakness is spreading in the mortgage market, as higher rates and lower buyer confidence weighed on purchases.

“Cash ISAs bucked the withdrawal trend. The £2.2 billion paid into these accounts wasn’t a particularly notable sum, and is significantly below the amount paid in during July for the previous two years.

“However, this isn’t the end of the dash for Cash ISAs. Savers and investors tend to be highly motivated by a deadline, and from April 2027 savers under 65 will see their annual Cash ISA allowance reduced from £20,000 to £12,000.

“That means we can expect Cash ISA enthusiasm to build again as the summer fades and the end of the tax year gets closer.

“The average rates on fixed deals fell in July, which is striking how generous the most competitive rates are right now.

“If you’re able to tie your money up for a year, you can make 4.9 per cent in the most competitive accounts, and if you don’t need it for three or more years you can get an account paying five per cent.

“Meanwhile the average rate for easy-access accounts was stuck at 1.65 per cent, while the best on the market (excluding those with a bonus that lasts less than a year) offers 4.55 per cent, according to Moneyfacts.

“It goes to show why it’s so important to look beyond the high street and shop around for a better deal using online banks and cash hubs.

“The traditional holiday lull dragged mortgage approvals lower, which doesn’t bode well for the property market in the coming months.

“It didn’t help that mortgage rates rose during July, as conflict in Iran made for volatile oil prices, and fluctuating interest rate expectations. More recently, the quieter property market has meant little change for mortgage rates.

“In a market like this it’s hardly surprising that buyers and sellers may be in no hurry to make a move, so it will be interesting to see whether we get a traditional autumn pick-up in activity, or whether the sluggishness that set in during the summer is here to stay.

“If your plans are on pause, it’s worth using the opportunity to put yourself in the best possible position to buy – whether that’s by topping up a Lifetime ISA for this year or working on your emergency savings.”