New Bank of England money and credit data shows net mortgage approvals for house purchases increased by 800 to 65,400 in July – the third consecutive monthly increase after falling for the previous four. Approvals for remortgaging decreased by 2,700 to 38,900.
‘It’s a slow climb, and the mortgage market is hardly shooting the lights out, but it’s another sign of a slow recovery from the post-stamp-duty-holiday slump’, said Sarah Coles, head of personal finance at Hargreaves Lansdown.
Net borrowing of mortgage debt by individuals decreased by £0.9 billion to £4.5 billion, while the effective interest on newly drawn mortgages decreased for the fifth consecutive month, down to 4.28% in July from 4.34% in June.
Richard Pinch, senior director of risk at financial services consultancy Broadstone, said the combination of lower rates and more relaxed regulation bodes well for future demand:
“Despite rising inflation fears and ongoing market uncertainty, mortgage rates look likely to continue their downward trajectory going into Autumn which should support sentiment despite rumours swirling around property taxation and a slowdown in future Bank of England rate cuts.
“Similarly, the FCA’s continued efforts to ease regulation in the mortgage market to support home ownership should also drive a boost in lending once those reforms begin to take effect.”
The Bank of England’s figures represent a 3% increase in mortgage lending compared to the same period last year, which Zoopla executive director Richard Donnell said mirrors the steady increase in sales agreed seen by the company. However, he warned higher mortgage rates and concerns over property taxes may reduce activity in the short-term.
Nathan Emerson, CEO of Propertymark, said the increase in approvals is ‘extremely positive’. He continued:
“The resilience of the housing market is often a direct indicator of consumer confidence and affordability, and it has been reassuring to see forward momentum as the year has progressed.
“Hopefully, now that the Bank of England has taken the call to cut the base rate by a further quarter per cent, we should see lenders bringing additional levels of competition to the marketplace.”
With approvals marginally above the 10-year average, managing director of equity research at RBC Capital Markets Anthony Codling said the data reflects a healthy housing market. He commented:
“Whilst the debates and uncertainty around property and other taxes continue, those who want to move and can afford to move appear to be planning to move. This is good news for UK housebuilders and the underlying housing market, as it will underpin the level of housing transactions in the coming months.”
PEXA’s chief operating officer Simon Wright said the figures would be welcomed by a sector that has been waiting for a more favourable outlook. However, he urged industry leaders not to lose sight of the bigger picture when it comes to the process of buying a home.
He explained:
“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 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.”
