Brexit uncertainty created pause in UK mortgage sector in July

The UK’s mortgage sector was hit in July as a result of the European Union referendum with both the number and value of house purchase approvals falling month on month and year on year.

The BBA figures show that house purchase approval numbers were 19% lower than in July 2015, though in the first seven months of 2016 they were some 2% higher than in the same period of 2015.

The data also shows that remortgaging approvals were 6% higher than in July 2015 and in the first seven months of 2016 were 21% higher than in the equivalent period of 2015.

Overall gross mortgage borrowing of £12.6 billion in the month was 6% higher than in July 2015 while net mortgage borrowing is 3% higher than a year ago.

As the first lending figures since the decision to leave the EU not much can be taken from them, according to Rebecca Harding, BBA chief economist. ‘The data does not currently suggest borrowing patterns have been significantly affected by the Brexit vote, but it is still early days. Many borrowing decisions will also have been taken before the referendum vote,’ she pointed out.

Andy Knee, chief executive of LMS, said that the figures suggest home buyers took stock in July. He pointed out that the value of loans for house purchases fell to its lowest level since March 2015 following a buoyant first six months of 2016,

‘What remains to be seen is whether this will become the norm or if August activity will be bounce back following the immediate shock. On the other hand, despite a small fall remortgaging is up as existing home owners capitalise on the record low mortgages available,’ he explained.

‘Following the vote for Brexit, swap rates fell leading to lower mortgage rates across the board. At the same time, intense speculation about a decrease in the Bank of England interest base rate to 0.25% and other monetary policy interventions have also contributed to lower rates, encouraged lending and driven home owners to take advantage of this,’ he said.

‘Anecdotally, there is little to suggest a lull in the demand for house purchase and remortgaging. We therefore expect activity to bounce back in the autumn months once the dust settles and some sense of normality returns,’ he added.

According to Tanya Jackson, head of corporate affairs at Yorkshire Building Society, believes that people’s desire to own a property largely outweighed any uncertainty caused by the EU referendum in July.

‘That said, the full effects of the vote are unlikely to be seen until a few months after the outcome of the vote was announced, as those buying a home in July are likely to have begun the house buying process before the EU referendum,’ she said.

‘We do expect the outcome of the EU vote to limit market activity to an extent in the short-term as prospective buyers take a wait and see approach on how it affects their finances. However, people’s desire to own a home should support demand for mortgages in the long term. This, combined with the lack of supply, is likely to put upwards pressure on house prices in the long term which will in turn push up the size of deposits and loans required,’ she added.

source: Property Wire

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