Mortgage lending drops 13% in July

The amount of money borrowed by homeowners to purchase new property fell by 13% in July compared to June, according to The Council of Mortgage Lenders (CML).

The CML found that homeowners borrowed £10.6bn in July, down 12% on July 2015 and took out a total of 58,100 loans, 14% less than in June and 13% less than in July 2015.

Within the figures the CML found that first-time buyers borrowed £4.4bn, down 19% on June and 4% less than 12 months ago. This represented 28,200 loans, down by 17% month-on-month and dropping 6% year-on-year.

People moving from one home to another borrowed £6.2bn, down by 9% from June and 16% from a year ago, successfully applying for 29,900 loans, a drop of 11% on the month and 19% on an annual basis.

There was an increase in homeowners remortgaging their properties, with £6bn of total remortgage activity in July, an increase of 7% on June and up 20% compared to a year ago. The CML said there had been a total of 33,400 loans, up 3% on last month and 10 higher than a year ago.

There was also an increase in borrowing from landlords in July, up 3% from June, though down 21% on July 2015. This came to 18,600 loans in total, up 1% compared to June and down 26% compared to July 2015.

Paul Smee, director general of the CML, said: “These figures cover the first full month of lending following the EU referendum. They show a month-on-month decline in first-time buyer and home mover activity and muted activity on the BTL market.

It is hard to determine whether these figures reflect a first uncertain reaction to the referendum vote, or are a sign of a market which was already cooling.  It will be quite some time before a full assessment can be made.

“We do believe that the Buy-to-let lending market is still readjusting after the large level of activity before the changes to stamp duty on second properties in April.

“Remortgage lending on the other hand has continued to grow. Borrowers seem keen to take advantage of the wide range of competitive deals in the market and, following the base rate cut in August, this is likely to continue.”

Analysing the outlook for house prices, Howard Archer, Chief UK & European Economist at IHS Global Insight said: “With the economy currently showing resilience following June’s Brexit vote, we now expect house prices to be essentially flat over the final months of 2016. However, we still believe that a dip in house prices is likely in 2017, probably by around 3-5%.”

Meanwhile, further data out this week from the Office for National Statistics (ONS) found that house prices went up by 0.4% in July, compared to 1.7% increases in both June and May and by 8.3% in the last 12 months.

The ONS’ measure of house price inflation lags many of the other measures as it is based on mortgage completions.

Archer said: “Pretty solid fundamentals for house buyers - high employment, decent purchasing power and very low mortgage rates – have remained a source of support for the housing market while a shortage of properties has also supported house prices.”