UK mortgage approvals fall, consumer credit growth holds steady in May

UK mortgage approvals fell sharply in May, dropping to their lowest level since May 2025, while consumer credit growth held steady, according to data from the Bank of England.

Net borrowing of mortgage debt by individuals fell to £2.9 billion in May, down from £4.4 billion in April and below the previous six-month average of £5.1 billion. This marks the lowest reading since May 2025's £1.9 billion. The decline suggests that higher interest rates continue to weigh on housing market activity, as affordability constraints persist. For traders monitoring the rates market, the data reinforces expectations that the Bank of England may need to consider rate cuts later this year to support the housing sector. Live rates and charts on NowPrice show how gilt yields are reacting to the evolving outlook.

Consumer credit net borrowing remained largely unchanged at £1.7 billion in May, still below the six-month average of £1.9 billion. However, the annual growth rate for all consumer credit edged up to 8.9% from 8.7%, with credit card borrowing accelerating to 12.1% from 11.8%. This resilience in consumer credit, despite higher borrowing costs, suggests that household spending may be holding up better than expected, which could give the Bank of England pause before cutting rates. The mixed signals from the data highlight the delicate balance the central bank faces between supporting growth and controlling inflation.

Looking ahead, markets will focus on upcoming inflation and GDP data for further clues on the UK economic trajectory. The Bank of England's next policy decision is due in August, and the mortgage and credit data will be weighed alongside other indicators. Traders should watch for any shifts in rate expectations, particularly if consumer spending shows further signs of weakening or if the housing market downturn deepens.