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BBA reports dip in mortgage approvals

Posted 28 October 2016 by Ben Salisbury

The British Bankers Association reported a small rise in mortgage approvals in September from August but the figure was down 15% on September 2015

Mortgage approvals dipped by 15% in September from 12 months ago as homeowners remained cautious and in ‘wait and see’ mode pending a clearer view on the ramifications of the Brexit vote.

However, there was a slight rise in the number of mortgages approved for house purchases from the 19-month low of 36,997 seen in August, according to new data from the British Bankers Association (BBA).

The figures show that 38,252 mortgages were approved in September, up from August but down from 44,941 in September 2015.

Dr Rebecca Harding, BBA Chief Economist, said: “Mortgage approvals picked up slightly this month but the housing market continues to shows signs of underlying weakness. Both house purchase and remortgaging approvals are down on the corresponding figures for 2015.”

The Prime Minister, Theresa May, has indicated that the negotiations for Brexit will not start in earnest until March 2017.

Even though there was a big annual drop, the figures were the first time there has been a rise in mortgage approvals for three months and back up earlier data from the Royal Institution of Chartered Surveyors which showed buyer enquiries were up in September for the first time since February. Mortgage approvals had peaked at 46,261 in January, a 23-month high.

Activity in the housing market slowed after the rush in the first quarter of 2016 to beat April’s Stamp Duty increase which affected the buy-to-let and second home sectors.

The BBA figures show an increase in remortgaging, with approvals only slightly down on 12 months ago and up by 15% over the first nine months of 2016 compared to the same period in 2015. This has been helped by the Bank of England’s cutting of interest rates and the low mortgage deals that are currently available.

Howard Archer, chief UK Economist at IHS Global said: “The September BBA data tie in with other indications that housing market activity has stabilized after recent softness, helped by the current resilience of the economy. The RICS has reported that buyer enquiries rose in September for the first time since February although the increase was modest and variable across regions.”

Outlook for house prices

Economists are split on the future direction of house prices. Archer thinks that house price increases will slow down in 2017

He said: “Housing market activity and prices are also likely to be pressurized by stretched house prices to earnings ratios and tighter checking of prospective mortgage borrowers by lenders.

“We expect that uncertainty will mount in 2017 once the UK formally launches divorce proceedings from the EU by triggering Article 50 and difficult negotiations increasingly come to the forefront.”

However, he expects that a fall in house prices will be tempered by a lack of availability.

The Centre for Economics and Business Research predicts the price of the average home is set to rise by £44,000 over the next five years despite the weak economic outlook for Britain.

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