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Posted on July 27th 2016 by admin-movingin

Mortgage approvals at 15-month low in month of Brexit vote

Original Author: Marc Shoffman

Mortgage approvals fell to a 15-month low in June amid Brexit jitters, data from the British Bankers Association reveals.

Figures from the trade body show mortgage approvals for house purchases dropped from 41,842 in May to 40,103 in June while net lending fell from £1.6bn to £1.3bn over the same period.

The number of approvals are 11% lower year-on-year. Overall, however in the first half of 2016, numbers were 5.5% higher than in the same period of 2015.

While the number of approvals was down, the value was up with gross mortgage borrowing of £12.2bn in the month was 4% higher than in June 2015, while borrowing in the first half of 2016 was £79.9bn, which is actually up compared with £63.6bn in the same period of 2015.

Dr Rebecca Harding, chief economist at the BBA, said: “This month’s high street banking data reflects the uncertainty that was felt ahead of the EU referendum.

“Business borrowing in June dropped for the first time in 2016, signalling that investment decisions were being delayed until after the vote.”

“Mortgage lending and approvals also fell back in June but remain above the low levels seen in April following the introduction of the Stamp Duty surcharge.”

Andrew McPhillips, chief economist at Yorkshire Building Society, said: “These figures show that home buyers chose not to postpone getting on the housing ladder despite uncertainty around the EU referendum. That said, it’s important to note that increases in lending are not solely influenced by movements in demand, but also by house prices.

“Current levels of house price inflation are putting upwards pressure on the size of the loans people are taking out which is, in turn, driving up mortgage lending. There was a 4.9% monthly increase in property transactions in June, according to HMRC, and the fact that lending is increasing on a much steeper scale shows how house price increases are affecting the mortgage market.

“Looking at the long-term trends, property transactions are actually down by 10.2% on last year, compared with a 4% increase in lending over the same period. The consequence of increasing house prices is that many people are being pushed out of the market due to the amount of money required to get on the property ladder.

“There is a clear need for more homes to be built, which should act to reduce house price inflation and help to make homes more affordable.”