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Mortgage approvals buoyant after Brexit

housing market3

The UK mortgage market remains stable following the results of the EU referendum, according to figures from both the British Bankers’ Association (BBA) and the Council of Mortgage Lenders (CML).

CML data for the month of July, which immediately followed the Brexit vote, reveals that gross mortgage lending totalled an estimated £21.4 billion, which is broadly in line with June’s gross lending total of £21.5 billion.

It is also largely consistent with the figure recorded in July last year (£21.6 billion), suggesting that the effect of April’s stamp duty change and the UK’s decision to leave the EU are not having the dramatic effect on the market that some predicted.

Additional factors

CML chief economist Bob Pannell said a further factor is likely to be the Bank of England, which is expecting “stronger economic headwinds” to build as 2017 approaches.

“The Monetary Policy Committee’s package of monetary policy measures represents a spirited effort to lean against these on a timely basis,” he added.

Mr Pannell also predicted that the Term Funding Scheme will boost market sentiment by engineering “broader cuts” to rates for existing mortgage borrowers.

No immediate change

Meanwhile, the BBA says its latest statistics are the first to be published that reflect the “immediate period” since the UK referendum, and do not suggest that borrowing patterns have been inordinately affected by the Brexit vote.

Net mortgage borrowing for July was identical to the figure published in June, with another three per cent rise recorded. The BBA noted that the borrowing period generally spans a few weeks or even months, so it may be another month or two before the true figures are revealed.

The overall number of approvals for the first seven months of the year is also higher when compared to 2015, indicating increased activity in the market.

The BBA also revealed that house prices grew at 8.7 per cent in July, with the month-on-month value of loans being one per cent higher than it was a year ago, indicating limited pressure in the housing market.

Business as usual

Rebecca Harding, chief economist at the BBA, commented: “All of this suggests that, for the UK borrower, it is business as usual for the time being. There is no panic exodus or lock down in borrowing.”

She went on to note that decisions to borrow could have been made before the Brexit vote, and so it will be prudent to look at longer-term trends before any conclusions are drawn.

In the meantime, borrowers are benefiting from some of the most competitive fixed rate mortgage deals in history, with HSBC, Metro Bank and Coventry Building Society launching the lowest two, five and ten-year fixed rate deals ever in recent weeks.

Data from LMS also indicates that 63 per cent of remortgagers lowered their rates last month, as they took advantage of cheaper deals appearing in the wake of Brexit.

The data also showed a greater proportion of people remortgaging a property in order to reduce their monthly repayments in July, with 43 per cent doing so, compared to 35 per cent in May before the referendum took place.

LMS chief executive Andy Knee said it is evidence that homeowners are moving to change their deals, regardless of the potential for a further base rate cut that could affect some tracker and standard variable rate mortgages. Although recent cuts mean rates do not have much further to fall, there are “significant savings” to be had in terms of monthly repayments.

Mr Knee added: “The prospect of an extra £200 or more to spare in their monthly budget will give many homeowners reason to weigh up their options over the summer.”

Use our mortgage calculator from the Mortgage Advice Bureau to work out the best deal for you.