“Modest recovery” in mortgage approvals but uncertainty still hampering activity

Posted 2 November 2016

Mortgage lending figures are up slightly from the 19-month low of August 2016, showing post-Brexit reaction is still restricting borrowers...

Mortgage approvals in the UK made a “modest recovery” in September but lending remains significantly weaker than the same period last year.

New figures from the British Bankers' Association (BBA) show that there were 38,252 mortgages approved in September, up from 37,241 in August. However, considering the figures in August represented a 19-month low, lending is still well below the autumn of 2015.

Lending down nearly 15% on same month in 2015

The latest BBA figures show that 38,252 mortgages were approved in September. While this is 1,111 more than in August, lending is 14.9% down on the same month in 2015 where 44,941 home loans were approved. Overall mortgage lending was 2% lower than a year ago at £12bn.

Despite the modest recovery in mortgage approvals last month, the BBA said the housing market “continues to shows signs of underlying weakness”.  However, September's activity reversed the previous three months of falls, reflecting earlier indications from the Royal Institution of Chartered Surveyors (RICS) that buyer enquiries rose last month for the first time since February.

Howard Archer, chief UK and European Economist at IHS Global Insight, said worry over the implications of the Brexit vote was causing people and businesses to sit on their hands. He said: "Heightened uncertainty is constraining consumer confidence and willingness to engage in major transactions, as well as hampering economic activity."

Homeowners take £41bn from their equity in 2016

Approvals for remortgages were only slightly lower than the same period in 2015 (at 24,841), but up 15% over the first nine months of the year compared to the equivalent period last year. Homeowners have taken out a total of £41bn from the equity in their properties in 2016. Experts say that this driven in large part by rock bottom mortgage rates encouraging borrowers to lock into cut-price deals.

Mortgage expert Mark Harris, said that the latest figures were "no real surprise". He added: "Confidence is lower, there is still uncertainty about what the future holds and when people are uncertain they will defer decisions.  Buying a house is a big transaction in anyone’s eyes and people are delaying that decision until they are happy that they are making the right one."

Former RICS residential chairman Jeremy Leaf believes that it has become a year “of two halves” since the Brexit vote. He said: "The market has not collapsed but on the ground we are seeing that the outcome and its aftermath is certainly making buyers and those considering remortgaging think twice before making decisions.

“Needless to say, resilience is very much to the core and pragmatic buyers and sellers are still achieving most of their aims.”


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