MortgagesAug 25 2016

Gross mortgage lending stable in July: CML

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Gross mortgage lending stable in July: CML

July’s gross mortgage lending remained steady hitting £21.4bn but the Council of Mortgage Lenders (CML) remains subdued on positive sentiment for the sector.

Last month’s £21.4bn figure “closely matched” June’s £21.5bn total and was just 1 per cent lower than the £21.6bn recorded in July 2015.

However, CML’s chief economist Bob Pannell said the subdued nature of property transactions and mortgage lending in July was consistent with the less positive backdrop for house purchase activity following the EU referendum.

“The Bank of England expects stronger economic headwinds to build as we move into 2017, and the Monetary Policy Committee’s package of measures represents a spirited effort to lean against these on a timely basis,” he added.

“The Term Funding Scheme should boost market sentiment a little, by engineering broader cuts to rates for existing mortgage borrowers than would have been the case, but it is not clear how well the Bank’s actions will underpin borrower demand in a more adverse economic climate.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, pointed out July and August are always traditionally quieter times of the year for the market, with the real test coming in September.

“Remortgaging is likely to go from strength to strength,” he said. “This is not so much because borrowers fear a rate rise, as it looks as though they are more likely to go the other way - [but] rather mortgage deals are so cheap, in particular fixed rates, it is a good opportunity to snap one up.”

Data from LMS confirmed this view, revealing almost two in three (63 per cent) remortgagers lowered their mortgage rates last month, up 7 percentage points from May.

As cheaper deals appeared on the market in the wake of Brexit, the data also showed a greater proportion of remortgagers acted to reduce their monthly repayments in July - 43 per cent, compared to 35 per cent pre-vote in May.

With the exception of two-year variable products at 75 per cent loan-to-value, BoE data showed average mortgage rates were lower across the board in July than was the case before the referendum - with many falling to record lows.

Reasons to remortgage (LMS) and average rates (Bank of England)

May-16

Jul-16

Change

% remortgaging to lower rates

56%

63%

+7 percentage points

% remortgaging to reduce monthly payments

35%

43%

+8 percentage points

Average 2 year fix - 75% LTV

1.88%

1.72%*

-16 basis points

Average 2 year fix - 90% LTV

2.70%

2.57%*

-13 basis points

Average 2 year fix - 95% LTV

3.92%

3.86%*

-6 basis points

Average 3 year fix - 75% LTV

2.12%

2.08%*

-4 basis points

Average 5 year fix - 75% LTV

2.67%

2.52%*

-15 basis points

Average 5 year fix - 95% LTV

4.68%

4.65%

-3 basis points

Average 10 year fix - 75% LTV

3.15%

3.05%*

-10 basis points

Average 2 year variable - 75% LTV

1.61%

1.72%

+11 basis points

Average 2 year variable - 90% LTV

2.66%

2.61%

-5 basis points

Average lifetime tracker

2.58%

2.57%

-1 basis point

Andy Knee, chief executive of LMS, said July’s figures show many people were keen to press ahead with plans to remortgage, regardless of growing speculation that a base rate cut might be on the cards.

“Recent cuts may mean that rates don’t have that much further to fall, but even so, there are significant savings to be had in terms of monthly repayments. The prospect of an extra £200 or more to spare in their monthly budget will give many homeowners reason to weigh up their options over the summer,” he added.

peter.walker@ft.com