Mortgage Approvals Hit a 2.5-Year Low — What It Means If Your Credit History Isn't Perfect

Mortgage approvals have just fallen to their lowest level in two and a half years, according to the latest Bank of England figures. On the surface that sounds like bad news for anyone hoping to buy a home in 2026. But look a little closer and the picture is more nuanced - because at the very same time, a growing number of lenders are actually cutting their rates. If you're trying to make sense of a market that seems to be sending two different signals at once, here's what's really going on, and what it means whether you have a clean credit file or a more complex one.

What the figures actually show

Net mortgage borrowing dropped sharply in May compared with April, and the number of mortgages approved for house purchases fell to its lowest point since December 2023. Fewer people are getting a mortgage approved to buy a home right now than at almost any point in the last two and a half years. That's a meaningful shift, and it reflects a market where both buyers and lenders have become noticeably more cautious in recent months.

Why caution and rate cuts are happening together

It might seem odd that approvals are falling just as several major lenders are trimming their rates. The explanation lies in how those two things are driven by different forces. The rate cuts are largely a response to swap rates easing back after a volatile period, giving lenders room to compete more aggressively for new business. The drop in approvals, on the other hand, reflects buyer hesitation - a natural pause after months of unpredictable pricing linked to global events, including the earlier spike in oil prices from the conflict in the Middle East. Many buyers and home movers appear to be sitting on the sidelines, waiting to see whether the market settles before committing.

What this means if your credit history isn't spotless

A quieter, more competitive lending market can actually work in favour of borrowers with a less straightforward credit history. When approval numbers fall, lenders don't stop wanting good quality business - if anything, some become more willing to look properly at applications that don't tick every standard box, rather than relying purely on rigid, tick-box criteria. For self-employed borrowers, those with a past CCJ, default, or a completed IVA, or anyone with a more complex income picture, this is often when specialist and adverse credit lenders sharpen their offering to attract applicants that high-street banks are turning away. The key is knowing which lenders are genuinely flexible right now, because that can change month to month.

How to stay ahead of the slowdown

If you're planning to buy or remortgage in the coming months, this is a good moment to get your paperwork and credit position in order before you apply, rather than after. Review your credit report for anything that needs explaining, gather up-to-date proof of income (especially important if you're self-employed or have variable earnings), and speak to a broker who can compare the whole of the market rather than a single lender's product range. With rates moving quickly and lender appetite shifting, having someone track the changes on your behalf can make the difference between missing a good deal and locking one in.

The takeaway

Falling approval numbers don't mean the mortgage market has closed its doors - they mean it's being more selective, while simultaneously trying to win business through sharper pricing. For borrowers with adverse credit, self-employment, or complex income, that combination can actually create opportunity, provided you're matched with the right lender at the right time. If you're unsure where you stand, a conversation with a broker who specialises in exactly these situations is the fastest way to find out.