The UK’s property sector showed signs of strain in October as uncertainty ahead of the autumn budget weighed, with the number of mortgages being approved for house purchase slipping, according to Bank of England (BoE) figures.
Net mortgage approvals for house purchases slipped by around 600 to 65,000 in October, according to the BoE, while approvals for remortgaging fell by 3,600 to 33,100, the lowest level since February 2025. Net mortgage borrowing by individuals eased to £4.3bn, down from £5.2bn in September.
Agents and analysts said buyers were unnerved by late-month speculation that the chancellor was considering a mansion tax on homes valued at £2m or more.
Nathan Emerson, chief executive of Propertymark, said: “Speculation surrounding the autumn budget may have played a role in contributing towards a decrease in the number of mortgage approvals during this period.”
The government ultimately introduced a high-value council tax surcharge in England on homes over £2m, effective April 2028. The measure will comprise four price bands, starting with an annual £2,500 surcharge for properties above £2mn and rising to £7,500 for those worth more than £5m.
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Jason Tebb, president of OnTheMarket, said: “Intense speculation surrounding the budget and what it might have in store for the housing market had an impact on approvals for house purchases – an indicator of future borrowing.”
Jeremy Leaf, the estate agent and former RICS residential chairman, added: “Mortgage approvals provide the best evidence of likely market activity over the next few months, and it’s clear from these figures that speculation about the chancellor’s budget took its toll.”
Remortgaging activity, which only counts borrowers switching to a different lender, also slumped. The 33,100 approvals recorded in October marked the weakest reading since February.
Richard Donnell, executive director at Zoopla, said: “Demand for mortgages to buy homes fell in October, as uncertainty around property tax announcements in the budget stalled activity in the housing market. Mortgage approvals are back to their five-year average, which points to housing sales of 1.15 million a year, and now that the threat of additional property taxes has been lifted from homes between £500,000 and £2m, we expect to see a rebound in demand as we enter the early months of 2026.”
Zoopla had previously warned that rumours of broader property taxes, potentially on homes above £500,000, were adding to market jitters.
Meanwhile, the BoE reported a slight easing in mortgage pricing. The “effective” interest rate on newly drawn home loans dipped to 4.17% in October, down from 4.19% the previous month, the lowest since January 2023.
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Beyond the housing market, corporate borrowing also softened. Private non-financial companies made net repayments of £4.8bn in October, the largest monthly pay-down since October 2023.
Consumer credit growth held steady at 7.2% year-on-year, with credit-card borrowing rising marginally to 10.9%. Households deposited an additional £6.8bn into banks and building societies, including £4.2bn funnelled into cash ISAs, up from September’s £2.4bn total.
Budget changes to ISAs helped drive the surge. From April 2027, the annual adult cash ISA subscription limit will be reduced to £12,000, though the overall ISA allowance will remain £20,000. Savers over 65 will continue to access the full £20,000 cash ISA limit.
Alice Haine, personal finance analyst at Bestinvest, said: “One data point that stands out, given the budget announcements on the future of Individual Saving Accounts (ISAs), is the £4.2bn funnelled into cash ISAs in October, almost doubling September’s subscriptions.” She added that many savers had been “spurred by speculation that cash Isa subscriptions could be capped well below the current £20,000 limit.”
While the new £12,000 cap had been expected, some details caught analysts off guard. Haine noted: “This included the plan to limit the subscription cap to the under-65s, leaving retirees free to continue using the full £20,000 allowance for cash savings.”
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She warned that HMRC intends to prevent savers from shielding cash within stocks and shares ISAs to get around the new rules, saying: “The government will ban transfers from stocks and shares ISAs to cash ISAs, apply a yet-to-be-known charge on interest earned on cash held in investment ISAs and potentially limit access to investments considered ‘cash like’ which might impact the ability to hold money market funds.” The upshot, she concluded, is that “the changes will make ISAs even more complex.”
Mark Hicks, head of active savings at Hargreaves Lansdown, said the “boom in cash Isas” was continuing, helped by speculation over the coming changes. “This speculation has helped keep rates higher than they would otherwise have been, and I expect to continue to see an increase of flows into ISAs when we get November’s data,” he said, adding that savers should take advantage of higher fixed-term rates “ahead of the expected base rate cut later this month.”
Lending trends diverged by business size: annual borrowing growth among large companies slowed to 6.9% in October from 8.2%, while the rate for SMEs held steady at 1.6%.
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