UK mortgage approvals fall to 2.5-year low as Burnham speech lifts markets

Andy Burnham’s Manchester speech gave markets a brief lift on Monday, but fresh Bank of England data underlined a weaker housing backdrop, with mortgage approvals falling in May to their lowest level since December 2023.

The two developments together pointed to the same tension in the UK economy: investors were encouraged by Burnham’s emphasis on fiscal discipline, while homebuyers, lenders and housebuilders faced another sign that higher borrowing costs are still cooling demand.

Burnham’s speech and the market reaction

Burnham delivered the speech at the People’s History Museum in Manchester, where he set out a broad economic and political pitch built around greater devolution, a Manchester-based “No 10 North”, business-rate reform and a bigger role for public control over key services.

He also stressed that he would stick to existing fiscal rules and keep to fiscal discipline. That line mattered to markets, which were watching for signs that his agenda might bring a looser approach to public spending.

The immediate reaction was modest but favourable. Live market coverage said UK borrowing costs dipped slightly after the speech and the pound strengthened. The move was not dramatic, but it suggested the City had taken some reassurance from the tone of the address.

Some business groups and investors welcomed the focus on growth, devolution and reform. Others were less convinced, saying the speech still left important questions unanswered, especially around how the proposals would be funded.

The speech also added to Burnham’s growing profile in national politics. Coverage described the Manchester event as a major economic signal, even as there was disagreement over how far it should be read as a leadership moment rather than a policy speech.

Mortgage approvals weaken further

Against that political backdrop, the Bank of England released data showing mortgage approvals for house purchases fell to 56,205 in May from 66,034 in April.

That was the lowest monthly total since December 2023, and it reinforced the sense that the housing market is still struggling with the effects of higher borrowing costs.

Remortgaging approvals also fell sharply, dropping to 33,300 in May from 51,200 in April. That decline matters because it suggests pressure is still feeding through not only to would-be buyers, but also to existing homeowners rolling onto new deals.

The figures were read as evidence of weaker housing demand, not just a one-off monthly wobble. Analysts said the drop is likely to weigh on housebuilders and could show up more clearly in sales later in the summer or early autumn.

What the data means for housing and lenders

Mortgage approvals are a closely watched forward indicator. When approvals fall, completed transactions often soften later, which can hit housebuilders first and then feed into a wider slowdown in housing-related activity.

That is why the May figures matter beyond the headline. A weaker approvals trend can leave lenders more cautious and may keep pressure on affordability even if bond markets and other funding costs ease a little.

For buyers, the message is mixed. The small fall in borrowing costs after Burnham’s speech may help sentiment at the margin, but the Bank of England data shows demand is still under strain.

For developers, the concern is timing. The latest numbers suggest the market has not yet stabilised enough for a clean rebound, even after a more reassuring political message to investors.

What happens next

The open question now is whether the market reaction to Burnham’s speech lasts beyond the first trading session and whether that translates into any easing in mortgage pricing for households.

A second question is whether Burnham’s team follows the speech with more detail on funding, oversight and implementation. The initial address was notable for its tone and ambition, but the lack of concrete financing detail was one of the main criticisms.

The final test will be how lenders and housebuilders respond to the BoE numbers. If approvals stay weak into the summer, the drag on housing demand could become more visible in sales, pricing and market confidence.

For now, the story is one of competing signals: political reassurance and better market sentiment on one side, and fresh evidence of a softer housing market on the other.