UK mortgage demand drops to 32-month low as Iran war drives up borrowing costs

Demand for UK mortgages has dropped to a 32-month low, with only 54,918 mortgages approved for new home purchases in August. This is the lowest monthly total since December 2023. The main reason for this decline is the sharp increase in borrowing costs, which have risen due to the ongoing war in Iran. As a result, the average five-year fixed mortgage interest rate has hit 5.94%, its highest level since October 2023.

Why it matters

The Iran war is driving up borrowing costs in the UK, leading to a drop in mortgage demand. This could lead to increased demand for safe-haven assets like UK gilts.

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