Both are below their six-month averages, according to latest BoE figures
Both the value and volume of mortgage borrowing fell in July, down significantly from their six-month averages, according to the Bank of England’s latest Money and Credit report.
Net borrowing of mortgage debt by individuals decreased to £4.3 billion in July, down from £7.7 billion in June and also below the previous 6-month average of £5.3 billion. The annual growth rate for net mortgage lending remained unchanged at 3.6%, however.
Meanwhile, net mortgage approvals for house purchases fell to 56,100 in July, below a six-month average of around 60,800 and reflecting wider changes in the market, according to Nick Leeming, chairman of Jackson-Stops. “The fall reflects the volatility in mortgage pricing seen during July, as changing inflation and interest-rate expectations affected the confidence and affordability calculations of some buyers,” he said.
“However, the figure should not be taken as a complete indication of the market entering the autumn. Our research found that 8% of owner-occupiers in England are planning to move or are already doing so.”
Is a turnaround likely?
Richard Pike, sales and marketing director at Phoebus Software, said he hoped July’s reversal would be temporary. “It’s important not to view one month in isolation. Mortgage demand remains sensitive to affordability and the direction of mortgage rates, both of which have continued to move around in recent months.”
“If approvals continue to fall, it would point to a more sustained loss of momentum. If they stabilise and begin to recover, July may prove to have been a temporary setback rather than the start of a wider slowdown.”
However, Lucian Cook, head of residential research at Savills, said he wasn’t so confident. “While annual house price growth remains marginally positive, prices are still coming down gently on an inflation-adjusted basis. This suggests that underlying affordability, as measured by house price-to-income ratios, is gradually improving.
“However, the increase in fixed rate mortgage costs we saw in mid-July has prevented that from translating into any improvement in activity in the market, leading to a third consecutive month of weak mortgage approvals and with more inflation to work its way through the system, it seems unlikely that we will see much of a sustained turnaround over the course of the remainder of the year.”
Remortgaging approvals, which capture remortgaging with a different lender, stayed almost constant, however, rising to 34,500 in July, from 34,100 in June.
The ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages increased to 4.45% in July, from 4.35% in June while the rate on the outstanding stock of mortgages was 3.97% in July, up from 3.96% in June.
