Mortgage approvals hit five-month high in July

According to figures from UK Finance, the new trade association which has replaced the British Bankers’ Association, 41,587 mortgages were approved in

According to figures from UK Finance, the new trade association which has replaced the British Bankers’ Association, 41,587 mortgages were approved in July, up 3% on the previous month.

Remortgaging approvals of 26,133 were up on the monthly average of 25,284 over the previous six months and 3% higher than in July 2016.

Monthly gross mortgage borrowing exceeded expectations, going up 4% to £23 billion in July.

So far this year, demand from first-time buyers and remortgagers has been driving the housing market, supported by record-low mortgage rates.

Buy-to-let lending had a weak start to 2017 and the sector’s contribution to overall net mortgage lending has fallen considerably over the last year following the introduction of a raft of new regulations.

UK Finance said it expects the pace of first-time buyer and remortgage activity to slow as the economic outlook becomes more “challenging”.

The Bank of England expects UK inflation to rise further in the coming months, peaking around 3% in October before gradually dropping to 2.2% over the three-year forecast.

This is likely to put further pressure on households already feeling the pinch from rising prices and stagnating wage growth.

Eric Leenders, head of personal banking at UK Finance, said: “Steady levels of mortgage activity seen through the first half of the year continued into July.

“First-time buyer numbers continue to be strong, helped in part by government schemes. But that has been offset by homemovers, where a shortage of homes on the market is limiting their activity.”

The housing market has come under increasing pressure in recent months from the growing squeeze on incomes and affordability pressures.

Experts believe the ongoing uncertainty surrounding Brexit compounded by the snap election have also contributed to the slowdown in the housing market.

Since last year’s Brexit vote, consumers have faced a loss in spending power as a result of rising inflation following a fall in the pound.

Combined with slowing wage growth, households are beginning to feel the pinch as their disposable incomes start to fall.

John Eastgate, sales and marketing director of OneSavings Bank, said: “There have clearly been a number of forces at play in the housing market. On the down side we have continuing economic and political uncertainty weighing down confidence, however this is balanced by the persistence of super low interest rates for borrowers, and we have seen good levels of first time buyer activity. Set against this backdrop, it is encouraging to see lending levels up.

“A record number of homeowners will be coming to the end of their initial term in September and October, so we would expect remortgaging to play a bigger role in the coming months. In the buy to let market, we predict a boost in lending later this year as landlords strive to complete deals ahead of the Prudential Regulation Authority’s upcoming changes to portfolio landlord lending rules.”

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