Net mortgage approvals remained stable in June indicating “there is still life in the mortgage and property market".
The Bank of England’s money and credit report for June found that net mortgage approvals, or approvals net of cancellations, for house purchases stood at 60,000 in June, the same as the previous month.
Lifetime Wealth Management mortgage and protection specialist, Katy Eatenton, said despite the General Election, the bank’s findings shows there is “still life” within the market, stating that July has been “far more positive” and that demand is “really starting to pick up”.
She said borrowers are either making their move with the view that rates will continue to reduce before they complete, or deferring completion as long as possible.
“I’m seeing many people remortgaging onto a two-year fixed rather than a five as the general consensus is that there is still going to be a bigger drop in mortgage rates than we are currently seeing,” she explained.
The impact of the election was also questioned by Savills head of residential research, Lucian Cook, who said: “June’s mortgage approvals provide further evidence that the general election had relatively little impact on home buyer sentiment.
“This chimes with the latest TwentyCi data which indicates that market activity in July will be slightly above what we would expect in a normal (pre-pandemic) market, having temporarily dipped 8 per cent below the monthly norm in June.”
However, Cook cautioned that it looks as though a delay to the first interest cut is holding some buyers back.
“While sales agreed are 30 per cent above the same time last year, activity levels haven’t matched the first five months of the year, even with a bit of post-election catch-up,” he explained.
“Although the first bank base rate isn’t likely to shift the dial on headline costs of mortgage debt, it will impact sentiment and make it easier for a wider range of buyers to meet banks' affordability stress tests.”
Borrowing
The bank also found that net borrowing of mortgage debt by individuals increased to £2.7bn in June from £1.3bn in May.
KPMG global and UK head of financial services, Karim Haji, said this reflects the fact that the more positive economic outlook is yet to be felt by consumers.
“Despite these positive economic indicators, it remains to be seen whether a turnaround will be sustained or if challenges are on the horizon,” he explained.
“What is clear is that despite two straight months of inflation remaining on-target, households aren’t necessarily feeling better off for it – indeed, wage growth has slowed in recent months, which may go some way to explaining this.
“Borrowers may well be awaiting movement on the Bank of England’s base rate before deciding to take out more credit although the recent fall in mortgage rates may lead to increasing confidence and appetite.”
