- Mortgage approvals rise to 62,600 in February, beating expectations
- Rate cut hopes fade as inflation risks return
- Housing market slowdown expected in the coming months
The UK housing market showed signs of strength heading into February, with mortgage approvals rising more than expected. Data from the Bank of England shows 62,600 home loans were approved during the month, up from a revised 60,200 in January and ahead of market forecasts.
At that point, conditions were relatively favourable. Inflation was seen stabilising near the Bank’s 2 per cent target, and expectations were building around potential interest rate cuts through the year. For buyers, that meant mortgages were still within reach.
But that window may have been short-lived.
From rate cuts to rate hike fears
The mood has shifted quickly following the escalation of the Iran conflict. Rising oil and gas prices have added fresh pressure on inflation, raising doubts over whether interest rate cuts will happen at all this year.
Instead, investors are now pricing in the possibility that the Bank’s Monetary Policy Committee could raise rates further — potentially taking the base rate to around 4.5 per cent from 3.75 per cent.
That change in expectations is already feeding into the mortgage market. Some lenders have started pulling products or increasing rates in anticipation, which could make borrowing more expensive in the months ahead.
A slowdown may be closer than it looks
Economists suggest the housing market may begin to lose momentum as sentiment weakens. Elliott Jordan-Doak from Pantheon Macroeconomics reportedly said activity could slow through the second quarter, with confidence playing a major role.
He noted that the market has been particularly sensitive to economic signals in recent years, and any shift in expectations can quickly affect buyer behaviour.
There’s also the question of affordability. If rates do rise further, monthly repayments would increase, putting additional pressure on buyers.
For now, house prices are still holding up. Data from Nationwide Building Society shows prices rose by 1 per cent in the year to February, with the average home valued at just over £273,000.
Whether that momentum continues, however, may depend less on demand and more on how interest rate expectations evolve in the coming months.
