The Bank of England Money and Credit statistics revealed a small monthly increase in gross mortgage lending from £24bn in June to £24.3bn in July.
Gross repayments also rose from £19.2bn to £19.7bn.
During July, the net borrowing of mortgage debt totalled £4.5bn, a £900m reduction on the previous month. This compared to a £3.2bn rise in net mortgage borrowing seen in June.
The annual growth rate for net mortgage lending saw a marginal rise from 2.8% to 2.9%.
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More approvals for house purchases, fewer for remortgages
The Money and Credit data showed that mortgage approvals for house purchases increased by just 800 month-on-month to 65,400. Meanwhile, approvals for remortgaging decreased by 2,700 to 38,900.
Richard Pike, chief sales and marketing officer at Phoebus Software, said the rise in approvals for house purchases suggested “underlying demand remains resilient despite affordability pressures”.
He added: “The drop in remortgage approvals highlights that many borrowers are still holding off making decisions in the hope of securing a better deal as rates settle. With the Bank of England’s recent base rate cut yet to fully feed through, the coming months will be crucial in determining whether activity levels continue to build momentum.”
Simon Wright, chief operating officer at Pexa, said: “Easing interest rates and a spate of new products from lenders, from family-backed mortgages to 0% deposits, will likely have increased approvals. This undoubtedly will be strongly welcomed by an industry that has hoped for a more favourable outlook for years and has been put at the heart of the economy.
“If we’re going to maintain this momentum, there is still a larger issue that needs to be addressed – the transaction process itself. As demand for mortgages increase[s] and measures to help improve affordability start to have an impact, we will place unprecedented strain on conveyancers to get transactions over the line when they are already at their maximum capacity. There needs to be greater attention placed on reforming the back-end infrastructure that supports the process to overcome this, delivering a more certain, secure and streamlined process for buyers at the same time. We need strong investment in technology that innovates the UK property market, otherwise this will be very short-lived.”
Sarah Coles, head of personal finance at Hargreaves Lansdown, said the increase in approvals was a “slow climb” and steady on last year’s figure of 62,700 and the pre-pandemic average of 66,700.
She added: “The jury is out on what happens next. June’s pick up in buyers, sellers and sales didn’t last into July and there are early signs that property prices fell in August. Buyers have been hit with a combination of high house prices, relatively high mortgage rates, uncertainty over the future of the jobs market, and worries about Budget speculation on possible property taxes. It means that, despite the small bump in approvals, we could see more buyers get cold feet over the autumn.”
The average interest rate on newly drawn mortgages fell for the fifth month in a row, declining from 4.34% in June to 4.28% in July. However, the rate on the outstanding stock of mortgages stayed at 3.88%.
