Gross mortgage lending stable in July

Robyn Hall

August 25, 2016

Gross mortgage lending held steady in July and was an estimated £21.4bn, the Council of Mortgage Lenders said today.

This closely matches June’s gross lending total of £21.5bn and is 1% lower than July last year (£21.6bn).

CML chief economist Bob Pannell said: “Indicators are likely to provide truer readings of market conditions the further we move away from the distorting effects of April’s stamp duty change. The subdued nature of property transactions and mortgage lending in July are consistent with a less positive backdrop for house purchase activity post-referendum.

“The Bank of England expects stronger economic headwinds to build as we move into 2017, and the Monetary Policy Committee’s package of monetary policy measures represents a spirited effort to lean against these on a timely basis.

“The MPC has pencilled in a further cut in Bank Rate later this year, but aims to avoid negative interest rate territory.

“The Term Funding Scheme should boost market sentiment a little, by engineering broader cuts to rates for existing mortgage borrowers than would have been the case but it is not clear how well the Bank’s actions will underpin borrower demand in a more adverse economic climate.”

Richard Sexton, director of e.surv, said the apprehension that followed the UK’s decision to leave the European Union had clearly permeated July’s mortgage lending figures.

But he added: “We are still seeing a broadly positive sentiment from brokers, lenders and consumers alike. For many, there was somewhat of a watching brief in July, as they waited to see how the vote to Brexit would impact the UK’s markets. Now, however, the ‘keep calm and carry on’ attitude seems to be prevailing once again.

First-time buyers are still driving UK’s mortgage market with recent CML data showing lending to that group has reached £3bn – up 3% quarterly and 10% annually.

Sexton said: “As would-be homeowners continue their search to get onto the housing ladder, it is positive to see many lenders are supporting customers by offering competitive products and bespoke lending options. What we now need to see is a concerted effort by the industry and the government alike to ensure housebuilding efforts start to meet the ever-rising demand for homes across the UK.”

Stephen Smith, director, Legal & General Housing Partnerships, said: “With results like these from the CML, it is all too easy to jump to conclusions about the impact Britain’s vote to leave the European Union has had on the housing market. However, it is still unclear as to whether this softening in July’s lending figures is the result of a market realignment following the vote on Brexit or rather a seasonal lull that often comes with the summer period.

“In any case, July’s figures are well up on the levels we saw earlier in the year, and with property transactions falling as well the concern remains that these increases are really the result of the previous stratospheric rise in the price of property.

“Until we see significant, visible action on the ground to deliver the thousands of new homes the country needs to resolve the housing crisis, more and more prospective homeowners will find themselves locked out of the housing market for the foreseeable future.”

John Goodall, chief executive and co-founder of peer to peer platform Landbay, said that predictably, buyer demand suffered in the direct wake of Brexit uncertainty.

But he added: “It’s hard to say whether this trend will continue until we know more about the long term impact on the market.

“What we do know is that the property – and in turn the mortgage market – is built on strong foundations, so we should be optimistic about the future. It’s clear that the UK’s housing shortage will remain a pivotal political and social issue, so we should expect buyer demand and lending levels to bounce back later in the year as the dust settles. In the meantime, it’s even more critical that the UK has a reliable and accessible buy-to-let market for those who cannot, or choose not to, buy their own homes.”

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