Money

UK banks see sharp rise in new mortgages in July


UK high street banks in July approved the highest number of new mortgages since early 2017 and recorded a sharp increase in remortgaging, driven by low interest rates, a strong labour market and persistent uncertainty over Brexit.

However, with other measures of the property market giving mixed signals, economists are sceptical of a big revival in house prices.

Banks approved 43,300 mortgages in July, higher than the 42,800 in June and 10.6 per cent more than in July last year, according to seasonally adjusted data from UK Finance, an industry body. The figure marks the second-strongest annual gain since March 2016. 

The number of remortgaging approvals was also strong, with a 15 per cent year-on-year rise to 30,200 in July, the fastest increase since May 2018.

Andrew Montlake, managing director of mortgage broker Coreco, said that July had been the busiest month of the year for his business.

“Remortgages were the driving force of the rampant activity levels in July, with households taking advantage of the exceptionally competitive mortgage rates available,” he said.

“July was the month when the odds of a no-deal Brexit got a lot shorter and this clearly incentivised people to act. Borrowers have become increasingly worried that lenders could easily pull down the shutters in the event of a disorderly Brexit and also increase their rates, so they’re getting on with it.”

Since the Brexit referendum in June 2016, the UK housing market has seen price growth slow, and contract in London, with fewer mortgages issued.

The number of mortgages approved by high street banks reached its lowest point since the referendum in December 2017, 22 per cent below the pre-vote peak of mid-2015. Since then, mortgage approvals have slowly increased, with the pace accelerating this year.

The UK Finance report is based on data from seven high street banking groups, which account for roughly two-thirds of the overall market. Broader mortgage figures will be released by the Bank of England on Friday.

Low interest rates and a strong labour market remain supportive of a pick-up in home buying. In the three months to June, the employment rate was the highest since records began in 1971 and earnings increased at the fastest pace in more than a decade. 

However, economists warned that rather than a sign of normalisation in the housing market, the pick-up could indicate a rush to buy properties before the new Brexit deadline of October 31.

“It is possible that mortgage activity is being lifted by some people looking to complete their house purchases before Brexit occurs on 31 October given the major uncertainties as to what will actually happen then,” said Howard Archer, chief economic adviser to EY Item Club, a consultancy. 

The Royal Institution of Chartered Surveyors measure of new buyer inquiries increased in June and July after more than two years of almost uninterrupted contraction.

But UK house prices show little sign of improvement, with an annual growth of only 0.9 per cent in June, the lowest in seven years and down from a peak of 8.2 per cent in June 2016, the month of the Brexit referendum. 

With Brexit uncertainty persisting, “the outlook for lending remains weak”, said Hansen Lu, property economist at consultancy Capital Economics. 



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