Prices creep higher while a sharp fall in mortgage approvals hints at a slowing market

The UK housing market is sending mixed signals, and anyone trying to read it right now needs to look beyond the headline numbers. According to the UK House Price Index, house prices rose by 2.0% in the year to June 2026, which sounds like steady growth. But on a seasonally adjusted month-to-month basis, average prices actually fell by 0.2% between May and June 2026. That small monthly dip, combined with what is happening to mortgage activity, suggests a market that is quietly losing momentum rather than one firing on all cylinders.

The regional picture tells an even more interesting story. Over the year to June 2026, price growth was strongest in the North West and North East of England, once Northern Ireland is set aside. Northern Ireland actually recorded faster growth, but its figures cover a different period, the year to Q2 2026, and were affected by changes to stamp duty in April 2025, so they are not directly comparable. Meanwhile, London went against the national trend entirely, with prices falling in the capital. For years London led the market; now it is the drag on it, while northern England carries the growth.

If house prices are the rear-view mirror, mortgage approvals are the road ahead. Bank of England data show approvals for house purchases in July 2026 were down 15% on a year earlier and down 4% on June 2026. In raw numbers, there were 56,053 approvals in July 2026 against 65,905 in July 2025. Since approvals are a leading indicator of completed sales, that decline points to fewer transactions in the months to come, and typically softer price pressure follows weaker demand.

The supply side offers a partial counterweight. In England, there were 33,960 seasonally adjusted house building starts in Q1 2026, a 9% fall on the previous quarter but an 18% rise compared with the same quarter of 2025. Completions were more encouraging still: 37,170 in the quarter, up 1% on the previous quarter and 3% year on year. More homes being finished is welcome news for a market chronically short of stock, though the quarterly dip in starts hints that builders are becoming more cautious.

It is worth remembering how volatile these building figures can be. Starts peaked at 68,350 in Q2 2023, largely because house builders brought work forward to avoid new building standards on energy performance and electric vehicle charging points, introduced from 15 June 2023. That front-loading depressed starts in later quarters, so quarter-on-quarter comparisons need careful handling rather than knee-jerk reactions.

Policy is also in motion. The Social Housing Bill 2026-27 is scheduled for its second reading in the House of Commons on 10 September 2026, and the next house-building data release from the Ministry of Housing, Communities and Local Government follows on 17 September 2026. Both could shape the debate about how the country addresses its housing shortfall.

So what does this mean in practice? For buyers and renters, weakening mortgage activity and falling London prices may signal improving negotiating power, particularly in the capital. For landlords and sellers, the 15% drop in approvals is a warning that demand is thinning, so realistic pricing matters more than ever. And for policymakers, the combination of modest price growth, falling transactions and uneven building output is a reminder that the housing crisis will not be solved by market forces alone.