Borrowers ‘coming off cheap fixed-rate deals’

Mortgage approvals fell to their lowest level since the end of 2023 in September, down to 53,400 and below the 58,000 average of the last six months. However, remortgaging approvals rose, up from 34,000 in August to 42,600 in September, according to the latest figures from the Bank of England.

“Remortgage activity saw a significant resurgence in September-  the strongest level seen since the rush of activity earlier in the year, of 50,077 in April 2026, and a clear indication of why remortgaging is a key focus for borrowers coming off cheap fixed-rate deals,” said Rachel Springall, finance expert at Moneyfactscompare.co.uk.

The fall in mortgage approvals means that net borrowing of mortgage debt by individuals decreased from £4.2bn in August to £3.9bn in September. The effective interest rate on newly drawn mortgages increased to 4.63% in September, up from 4.60% in August.

Impacting buyer confidence

Simon Gammon, managing partner at Knight Frank Finance, said rising mortgage rates have had a significant impact on buyer confidence. “Housing market activity continued to soften through September as mortgage rates climbed,” he said.

“Inflation rose to 3.5% during the month, while expectations of a prolonged period of elevated energy prices due to the conflict in the Middle East pushed swap rates higher, prompting lenders to reprice their mortgage products. Lenders’ margins remain extremely thin, leaving them particularly sensitive to changes in the inflation outlook,” Gammon continued.

However, although elevated energy costs due to the conflict in the Middle East continue to exert upward pressure on inflation and mortgage rates, Gammon believes that competitive forces could offer hope for borrowers. “The Office for Budget Responsibility expects inflation to average 3.4% in 2027, according to forecasts published alongside the Budget. That suggests mortgage rates are likely to remain elevated for the foreseeable future. However, competition between lenders remains intense, and any improvement in the inflation outlook that brings down funding costs is likely to be passed on to borrowers,” he said.

Meanwhile, Mark Harris, chief executive of mortgage broker SPF Private Clients, said the remortgaging numbers represented a stronger borrower demand for the best deals. “Remortgaging numbers rose significantly, suggesting that borrowers are shopping around for better deals as mortgage rates continue to rise,” he said.