British mortgage approvals fall to six-month low in February

British mortgage approvals cooled to a six-month low in February ahead of a rise in transaction taxes on many house purchases while consumer lending grew at the joint-slowest pace in nearly three years, Bank of England data showed.

Lenders approved 65,481 mortgages in February, down from 66,041 in January.

This was the lowest number since August and just below the median in a Reuters poll of economists which had pointed to approvals of 66,000.

Net unsecured lending to consumers increased by slightly more than expected, up 1.358 billion pounds ($1.76 billion) in February after a 1.701 billion pound increase in January.

On an annual basis, consumer lending growth matched January’s 6.4 per cent rate, which was the lowest since May 2022.

Matt Swannell, chief economic adviser to the consultancy EY ITEM Club, said slowing mortgage approvals reflected an unwinding of a boost late last year, when homebuyers sought to purchase homes ahead of an increase in property transaction taxes in April. “In the near term, (this) will continue to drag on mortgage activity,” he said.

In the three months to the end of February, net mortgage lending - which reflects completed transactions - grew at the fastest pace since the three months to the end of November 2022, when former prime minister Liz Truss’ aborted budget plans led to mortgage lending drying up.

While net consumer lending increased at a slower pace in February, analysts said the better-than-expected monthly increase chimed with strong retail sales data.

“Overall, the data is in line with a picture of a slow, gradual improvement in consumer spending, which should help push (economic) growth up to 0.3 per cent quarter-on-quarter in the first quarter,” said Thomas Pugh, economist at accountancy firm RSM.

Meanwhile British house prices rose at their fastest pace in two years in the 12 months to January, according to official data published.

Average house prices rose by an annual 4.9 per cent to 269,000 pounds ($346,956.20) in January 2025, the fastest increase since January 2023 and up from a 4.6 per cent increase in the 12 months to November, the ONS said.

Private-sector rents across Britain in February were 8.1 per cent higher than in the same month last year at 1,326 pounds a month, slowing from January’s 8.7 per cent rise.

Britain’s government will stick to its fiscal rules despite global upheaval, finance minister Rachel Reeves said on Sunday, raising the prospect of belt-tightening measures to meet her targets for the public finances in a budget update this week.

In her first full budget last October, Reeves sought to win the trust of investors by pledging to bring day-to-day spending into balance with tax revenue by the end of the decade.

But she is believed to have been knocked off course by slow economic growth and higher borrowing costs. A potential global trade war triggered by US President Donald Trump’s import tariffs has led to downgrades to the international outlook.

“The world has changed. We can all see that before our eyes and governments are not inactive in that,” Reeves told Sky News. “We’ll respond to the change and continue to meet our fiscal rules.”

British debt costs jumped after higher-than-expected borrowing figures, showing nervousness among investors about the ability of Prime Minister Keir Starmer’s government to fix the public finances with the economy stuck in a slow gear.

Last week, the government announced cuts to welfare spending to save around 5 billion pounds ($6.5 billion) a year, angering some lawmakers in Starmer’s centre-left Labour Party.

Reeves is expected to announce further measures in her Spring Statement on Wednesday to restore her 10 billion pounds of room for manoeuvre to meet her fiscal targets.

Reeves said public spending was still expected to outpace inflation in each year of the current parliament.

“But as a government, we have to decide where that money is spent, and we want to spend it on our priorities,” she said.

The government has increased spending on defence in response to Trump’s calls on Europe to do more to protect its own security. Further increases are planned for the coming years.

Reeves said 10,000 public sector jobs could be cut under a new plan to lower civil service costs by 15% by the end of the decade and save over 2 billion pounds ($2.58 billion) a year, adding it was not right to keep COVID-era staffing increases.

More than 500,000 people work in the civil service.

With the economic growth outlook likely to be slashed on Wednesday, Britain hopes to avoid the brunt of

import tariffs that the Trump administration is considering. “President Trump is rightly concerned about countries that run large and persistent trade surpluses with the US The UK is not one of those countries,” Reeves told the BBC.