Mortgage approvals hit three-month high, says Bank of England

Mortgage approvals hit three-month high, says Bank of England September figures suggest market picking up after EU referendum, though lending remains below levels at start of 2016

The number of mortgages approved for house purchases bounced back and achieved a three-month high in September after falls in the summer, but lending remains below the levels recorded at the start of the year, figures from the Bank of England show.

A total of 62,932 house purchase loans worth £11.1bn were approved during the month, up from 60,984 in August, and higher than expected, but below the previous six-month average of 64,841.

Activity in the first three months of the year was boosted by a change to stamp duty rates on 1 April, which added a three percentage point surcharge to the tax on second homes. However, even after that deadline, more mortgages were granted than in September.

Mortgage rates have hit new record lows since the Bank of England cut the base rate to 0.25% in August, but agents have reported a fall in homes for sale since the UK vote for Brexit in June.

The figures suggest the market is starting to pick up after a lull in the immediate aftermath of the EU referendum.

The Bank reported an increase in the remortgage market, where borrowers may have decided to make the most of low rates and lock into deals.

The number of approvals for remortgaging in September rose to 42,440 – above the average of 41,882 recorded over the previous six months.

Jeremy Leaf, a north London estate agent and a former residential chairman of Rics, said: “The figures show a welcome bounce back in lending from the very disappointing figures the previous month.

“While bearing in mind that these numbers are a little historical, they reiterate what we are seeing on the ground that following an initial pause buyers are getting back to business, albeit a bit more cautiously.”

The Bank’s data showed a fall in new unsecured borrowing, driven by a drop in the value of personal loans and overdrafts taken through the month. Total levels of consumer credit grew by £1.4bn in September, below the £1.6bn average over the previous six months.

Within this, credit card borrowing remained at around £0.5bn, but other unsecured lending increased by £0.9bn, compared with a six-month average of £1.1bn.

Scott Bowman, UK economist at Capital Economics, said the figures suggested that “the housing market is stabilising and appetite for debt hasn’t taken much of a hit following the Brexit vote”.

Howard Archer, chief UK economist at IHS Global Insight, said September’s slowdown in unsecured consumer credit tied in with a loss of momentum in retail sales over the month.

“It could be that consumers became a bit more cautious over borrowing in September or it could just be that they took a bit of a breather after largely spending at a rapid rate over the summer,” he said.

“The fundamentals for consumers remained largely healthy during the third quarter, with employment at a record high and purchasing power benefiting from earnings growth still running well above consumer price inflation.

“However, the positive fundamentals for consumers are now starting to be diluted – particularly by rising inflation – and this seems set to become a developing trend over the coming months.”


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