Source: Sharecast
According to the central bank's latest Money and Credit report, there were 61,013 mortgage approvals in December, against 64,072 in November - revised down from 64,530 - and the lowest since June 2024.
December is traditionally one of the housing market's quietest months. However, analysts had still predicted a modest rise.
Net borrowing of mortgage debt was unchanged on November at £4.6bn.
The effective interest rate - the actual interest paid - on newly-drawn mortgages eased to 4.15% from 4.20% a month previously.
Oxford Economics said: "December’s outturn [comes] as a major surprise, given the recent strength of approvals. But we think there’s a good chance the big drop will either be revised away or just prove to be noise.
"Christmas means few working days and plenty of distractions from home buying, so December is typically a low activity month. This means the BoE must apply a large seasonal adjustment to the raw data."
Matt Swannell, chief economic advisor to the EY Item Club, said: "The soft outturn should be interpreted with caution.
"Approvals remain well above the 55,000 monthly average of 2023-2024, with lending flows similarly stronger. The market's firmer footing comes after a period where stronger wage growth and falling mortgage rates helped to drive a recovery in mortgage affordability."
The monthly report also showed a decline in net borrowing of consumer credit in December, as repayments rose. It eased to £1.5bn from £2.1bn in November, with borrowing on credit cards down to £700m and through other forms of consumer credit - including car dealership finance and personal loans - falling to £800m.
Households also deposited an additional £4.8bn with banks and building societies, although that was down notably on November’s £8.8bn.
Swannell said: "Real household income growth is cooling abruptly, but consumer sentiment has been steadily firming, and there’s scope for households to mitigate the impact of weaker income growth by saving less.
"These conditions should help to offset weaker income growth and keep consumer spending growth at around 1% this year."
