MortgagesAug 24 2017

Gross mortgage lending up but slowdown expected

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Gross mortgage lending up but slowdown expected

Gross mortgage lending climbed by 4 per cent month-on-month to £23bn in July, according to an estimate by UK Finance.

On a seasonally adjusted basis, this figure is £21.9bn for the month, above the £20.5bn average seen over the last 12 months.

Figures from the trade body’s high street banking data – which covers around two-thirds of domestic retail banking assets – show gross lending reached £13.2bn, up from £13.1bn in June and by 5 per cent year-on year.

House purchase approvals stood at 41,587 in July, close to the six-month average of 41,567 and 9 per cent higher than in July 2016.

At 26,133, remortgaging approvals were up on the monthly average of 25,284 over the previous six months and 3 per cent higher year-on-year.

But UK Finance said it expected the rate of lending growth to slow slightly in the coming months due to “a potentially more challenging economic outlook”.

First-time buyers and remortgagers have supported the housing market in recent months as interest rates remained at record lows.

But despite a continued fall in unemployment, wage growth remains below the rate of inflation, putting a strain on household budgets.

UK finance said the evidence showed consumers were responding to a tougher economic climate by both cutting spending and saving less.

Eric Leenders, head of personal at UK Finance, said: “Steady levels of mortgage activity seen through the first half of the year continued into July. 

“First-time buyer numbers continue to be strong, helped in part by government schemes. But that has been offset by home movers, where a shortage of homes on the market is limiting their activity.”

The trade body’s data also reveals a significant drop in lending to the wider corporate economy.

There was a £698m fall in bank lending to non-financial businesses in July, following on from a £657m drop during the previous month.

John Phillips, Just Mortgages and Spicerhaart operations director, commented: “Today’s gross lending estimate may be generally flat, but there are elements within the housing market that are faring better than others - namely the first-time-buyer sector.
“With over one million help-to-buy Isa accounts opened since it was launched, there may have been fears that construction of new homes could be a stumbling block to getting first-time-buyers onto the housing ladder, even with financial help.  

“However, in its latest construction output figures the ONS reported that construction of new homes was at its highest level for 15 years. This bodes well for the one element that appears to be keeping the market as a whole afloat in trying times.”