Mortgage approvals in the UK increased slightly in June despite rising borrowing costs driven by geopolitical tensions in the Middle East, according to data from the Bank of England. Lenders authorized 58,200 home loans last month, up from 56,565 in May and above analysts’ expectations of 57,100. However, this figure remains below the six-month average of 61,400 approvals.

The initial surge in mortgage demand earlier this year, attributed to buyers seeking to lock in lower interest rates ahead of the conflict, has since moderated. The average interest rate on new mortgages rose to 4.35% in June, up from 4.22% in May, while rates on outstanding mortgages edged up to 3.96% from 3.92%.

Alongside higher borrowing costs, house prices have shown signs of decline. Data from Nationwide, the UK’s largest building society, indicated that typical property values fell in both May and June, with the average home price now at £277,484.

Economist Thomas Pugh of RSM UK cautioned that rising mortgage rates and expected inflation increases in the latter half of the year may slow house price growth, consistent with declining survey indicators of property market activity. Despite this, Pugh noted the economy demonstrated resilience during the early phase of the Iran conflict, citing strong consumer credit card spending, elevated borrowing demand, and the uptick in mortgage approvals.

Consumer behavior also reflects underlying economic dynamics. In June, net credit card spending rose to £900 million, up from £600 million in May, while households simultaneously increased their savings by £6.3 billion, suggesting that spending has not been financed by drawing down existing savings.

Market observers expect the Bank of England’s monetary policy committee to maintain the current bank rate at 3.75% in its upcoming decision. Rob Wood, chief UK economist at Pantheon Macroeconomics, highlighted sustained growth in borrowing by consumers and businesses as a factor supporting continued GDP expansion in the near term.