BBA: Lending rises despite transactions falling in June

Ryan Bembridge

July 26, 2016

Lending was higher than last year despite transactions falling in June as borrowers were stretched by higher house prices, the BBA’s High Street Banking Statistics show.

In June lending stood at £12.2bn which was 4% higher year-on-year, but house purchase approvals fell by 11% from June 2015.

Andrew McPhillips, chief economist at Yorkshire Building Society, “Current levels of house price inflation are putting upwards pressure on the size of the loans people are taking out which is, in turn, driving up mortgage lending.

Base rate held at 0.5%

“The fact that lending is increasing on a much steeper scale shows how house price increases are affecting the mortgage market.”

In the first half of the year lending stood at £79.9bn, up from £63.6bn the year before, while transaction numbers were up by 5.5% year-on-year.

Dr Rebecca Harding, chief economist at the BBA, felt the data reflected the uncertainty felt ahead of the EU referendum but warned not to over-interpret the results.

She said: “Overall, business confidence was clearly fragile in anticipation of the outcome of the vote, but these results are not a verdict on the health of the economy post-Brexit.

“We won’t start to see that data come through until the autumn and any trends before then should not be over-interpreted.”

Jonathan Harris, director of mortgage broker Anderson Harris, agreed. He said: “A month on from the decision to leave the European Union, it is too early to say for sure what impact this has had on the market.

“June’s mortgage lending figures are too close to the event to be truly conclusive, although they indicate that lower mortgage lending and approvals were a result of the uncertainty surrounding the referendum.

“However, gross and net mortgage borrowing were still both higher than a year ago.

“Approval numbers also picked up from April, where numbers were lower following a surge in the first quarter as landlords brought forward buying decisions.

“Remortgaging is on the rise, a trend we expect to see continue over coming months. This is not so much because borrowers fear a rate rise – on the contrary it looks increasingly as though the next move in base rate will be downwards – but because fixed rates in particular are just so cheap.”

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