The Bank of England’s (BoE) Money and Credit statistics showed gross lending reached £16.5bn in July, the lowest lending figure in a month since June 2020 when the figure was £16.3bn.
This was also a sharp decrease from June’s record high of £43.8bn.
Gross mortgage repayments fell from £27.8bn to £18.1bn in July.
Approvals for house purchases declined to 75,152, the fewest since July last year when numbers reached 68,641.
Compared to June, this was lower than the 80,272 approvals recorded.
Both the decreases in approvals and gross lending coincided with a general slowdown in the market once the initial phase of the stamp duty holiday passed. Recent figures from HMRC showed residential transactions fell 63 per cent month-on-month in July to 73,740.
However, purchase approvals were still higher than pre-pandemic levels, BoE said.
Still a busy market
Remortgage approvals rose to 37,441 in July, up from 35,790 the previous month.
Richard Pike, Phoebus Software’s sales and marketing director, said: “There is evidence from today’s figures that the market is, as predicted, starting to slow down after the stimulus of the stamp duty land tax holiday was removed.
“However, it has not come to a grinding halt and the remortgage market is running at a healthy pace, with borrowers increasing their facilities to fund improvements on existing properties or release equity.”
“The continued low-interest environment may not be good for savers, but it is giving borrowers a plethora of mortgage deals to choose from,” he added.
Low rates encouraging repayments
The average rate on newly drawn mortgages dropped by 12 basis points to 1.83 per cent. This was slightly down on the average 1.85 per cent rate recorded in January last year, before the pandemic affected the economy. However, it was equal to averages seen since March 2020.
The average rate on outstanding mortgages slipped to a low of 2.05 per cent, a decrease of two basis points.
This resulted in net mortgage repayments of £1.4bn in July, the second time this decade that repayments had been higher than net borrowing. This followed a record high net borrowing of £17.7bn in June.
Andrew Montlake, managing director of Coreco, said: “The net repayment in July is partly a reflection of the end of phase one of the stamp duty holiday and partly a result of the stupendously low rates on offer, which are seeing people remortgage in droves.
“The crazily low-rate environment has also enabled people to repay off more of their mortgage than they may otherwise have been able to.”