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Mortgage activity slips in June – BoE

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  • 29/07/2022
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Mortgage lending and approvals for home loans declined in June, figures have shown.

According to the Bank of England’s Money and Credit report, gross mortgage lending fell to £25.4bn from £28.1bn in May. Gross repayments also decreased to £20.3bn from £21.2bn over the month. 

Net borrowing of mortgage debt also dropped, from £8bn in May to £5.3bn in June. However, this remains above the pre-pandemic average of £4.3bn in the year to February 2020. 

 

Typical slowdown 

It was noted by industry figures that it was expected for activity to slowdown in the summer months as people went on holiday. 

Simon Webb, managing director of capital markets and finance at LiveMore Capital, said: “The drop in mortgage borrowing by some £2.7bn heralds the move towards the slower time for house purchases during the summer months.”

John Phillips, national operations director at Just Mortgages, said: “Although this may at first seem like a significant fall in net lending in June, we should remember that there was a considerable spike in May and volumes are still well above the pre-pandemic average. 

“We are expecting borrowers’ ability to satisfy lenders’ affordability rules to be affected by increases in household spending on fuel, food and energy but this has yet to materialise is any significant way and there is still an appetite from borrowers to secure a deal before further rate rises. However, completion times are being stretched and so we should expect a lag in housing transactions over the coming months.”

Geoff Garrett, director of Henry Dannell, said: “A previous flurry of spring mortgage market activity had reversed the steady decline in mortgage approvals seen so far this year, however, it seems as though this has been short-lived, and the latest figures once again show a reduction in buyer appetites with approvals reaching their lowest point since June 2020.    

“It’s likely we will now see mortgage approvals see-saw marginally up and down from month to month as a result of seasonal influences, but we expect to finish the year at a much lower threshold when compared to the unusually high records set during the pandemic.” 

 

Approvals fall as rates climb 

Approvals for house purchases fell to 63,726 in June, from 65,681 in May which the central bank noted was below the pre-pandemic average of 66,700 in the year to February 2020. 

Remortgage approvals for borrowers switching to a new lender also dropped to 44,049 from 47,244 in May. This is also below the pre-pandemic average of 49,500 in the 12 months to February 2020. 

Webb added: “Combined with a drop by 2,000 of approvals for house purchases, these reductions may also reflect a growing nervousness in the market as interest rates rise.”   

The effective interest rate on newly drawn mortgages rose 20 basis points to 2.15 per cent in June, while the rate of outstanding mortgages ticked up by four basis points to 2.11 per cent. 

Mark Harris, chief executive of SPF Private Clients, said: “While there are still signs of strong activity in the housing market, it is noticeably calmer than the frenzy of last year. With the effective interest rate on new mortgages rising by 20 basis points to 2.15 per cent in June, it is no surprise that mortgage brokers remain busy. Borrowers are worried about rising rates and are keen to secure a fixed-rate mortgage before they become more expensive.

“With the money markets pricing in another rate rise at August’s meeting of the Monetary Policy Committee, there is some urgency to lock into the best deals.”

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