Brexit hits lending as mortgage approvals fall to one-year low
New data from the Bank of England has revealed that mortgage approvals in Britain fell to their lowest level in a year as confidence in the market fell following the decision to leave the European Union.
The number of mortgages approved in June was below expectations, and the lowest amount since May 2015. The latest figures from the Bank of England have shown that mortgage approvals in June fell to their lowest level in just over a year. There were 64,766 mortgages approved in June, a fall of 1,956 on May's total of 66,722. The June figure was below analysts' expectations of 65,650.
The data follows less comprehensive figures from the British Bankers’ Association which showed that the number of mortgages approved by banks fell to a 15-month low in June.
The news comes as the Bank of England considers how to support the housing and mortgage market in the light of June's decision to leave the EU. Market research company GfK found that consumer confidence in the UK suffered its sharpest drop in more than 26 years after the Brexit vote, as Britons became increasingly pessimistic about the UK economic outlook.
This lack of confidence coupled with a fall in mortgage approvals is likely to mean the Bank decide to cut interest rates and stimulate the economy, perhaps by extending the quantitative easing programme.
The Bank of England also reported that net mortgage lending, which lags approvals, rose by £3.348bn in June, some way off March’s recent peak of £7.275bn.
As well as hitting the number of mortgage approvals, the referendum result has also had a negative impact on the UK housing market, according to the Royal Institution of Chartered Surveyors (RICS). RICS have reported that the Brexit vote caused buyer interest and the expectation of future property sales to fall at the fastest pace in years.
Fundamentals of market 'continue to be positive'
While some indicators show dwindling activity in the mortgage market, some experts believe that it is still too soon to determine whether the effect of the Brexit vote has been wholly negative. Nationwide has reported that house prices rose in July at their quickest annual pace in four years while some mortgage experts believe low rates are still driving demand for home loans.
Jeremy Duncombe, director of Legal & General's mortgage club, says: "Though there has been some concern about the impact of uncertainty following the vote, demand for property is still there and the fundamentals of the market continue to be positive in the face of Brexit. The remortgaging market has remained strong over this period, with lenders continuing to offer competitive deals."