Mortgage approvals fall to 18-month low in wake of Brexit vote
The number of mortgage approvals fell to an 18-month low in July as consumers continued to be reluctant to make major financial decisions in the wake of the EU referendum.
New figures from the British Bankers' Association show that the number of new mortgages has fallen sharply since the start of the year, with experts attributing the fall to the Brexit vote and changes in stamp duty on investment properties.
Brexit and stamp duty changes blamed for fall in new mortgages
New data from the British Bankers' Association (BBA) has revealed that just 37,622 mortgages were approved in July, the lowest level in 18 months. 2,143 fewer loans were approved in July than in June, and the total number of approvals has fallen by around 20% since a 23-month high in January.
The BBA partly attribute the fall to new stamp duty rules on buy-to-let homes as since increases to stamp duty came into effect in April, the buy-to-let sector has experienced a quiet period.
Other experts point to the fallout of the EU referendum as a reason for the fall in new mortgages. Samuel Tombs, chief UK economist of Pantheon Macroeconomics, says the fall in mortgage approvals was clear evidence that the Brexit vote was making households reluctant to make major financial commitments.
He adds: "The decline in approvals corresponds closely with the drop in RICS' measure of new buyer enquiries and indicators of consumer confidence, so the slowdown seems demand-led. Lending therefore will revive if confidence improves, but the forthcoming stagnation of real incomes, as inflation revives and firms stop hiring, means there's little reason to expect a substantial improvement in sentiment."
House sales fall in “less positive backdrop”
The BBA figures come after sales data revealed that 16,000 fewer homes were sold in July, compared with the same month in 2015.
Surveyors recently reported that housing activity would be flat in the aftermath of the vote. Council of Mortgage Lenders (CML) chief economist Bob Pannell says: "The subdued nature of property transactions and mortgage lending in July are consistent with a less positive backdrop for house purchase activity post-referendum."
However, the fall could be partly based on seasonal factors and some experts believe the true picture will be seen in the autumn.
Mortgage expert Mark Harris remarks: "July and August are always traditionally quieter times of the year for the market; the real test will come in September when people get back from holiday. Then we will see whether they are making decisions to buy or whether they put these on hold until there is further clarity."