Lending is being driven by growth in house prices rather than transactions.
The number of loan approvals for house purchase was 60,058 in August, compared to the average of 66,734 over the previous six months, figures from the Bank of England show.
But overall lending to households increased by £3.9bn in August, compared to the average monthly increase of £4.1bn over the previous six months.
Total lending to individuals increased by £4.5bn in August, compared to the average of £4.8bn over the previous six months.
And lending secured on dwellings increased by £2.9bn in August, compared to the average of £3.3bn over the previous six months.
The number of approvals for remortgaging was 40,225, compared to the average of 41,878 over the previous six months and the number of approvals for other purposes was 12,109, compared to the average of 12,675 over the previous six months.
Meanwhile consumer credit increased by £1.6bn in August, broadly in line with the average over the previous six months.
Within consumer credit, credit card lending increased by £0.4 billion in August, in line with the average over the previous six months. Other loans and advances increased by £1.2 billion, broadly in line with the average over the previous six months.
Andrew McPhillips, chief economist at Yorkshire Building Society, said: “The fact that mortgage lending is continuing to grow despite decreasing mortgage approvals shows that lending is being driven by growth in house prices rather than transactions. We expect the effects of uncertainty around the EU referendum to begin to feed through in the coming months, which may cause activity to slow as buyers and sellers postpone getting onto the property ladder until the future of the UK economy is clearer.
“However, the underlying lack of supply should cause house prices to continue to increase in the long term which is likely to push up mortgage lending. In order to ensure that the market grows more steadily in the long term, more homes must be built to bring supply in line with demand and make properties more affordable.
“Tackling the supply deficit is likely to take a number of years, so it is crucial that the government considers introducing helping-hand measures in order to enable more people to get onto the property ladder in the short-term as well. The Government could, for example, reform Stamp Duty by making it a seller’s tax rather than a buyer’s to reduce costs for first-time buyers and those moving up the property ladder.”
Jonathan Sealey, CEO of Hope Capital, added: “It was only last week that the CML announced that £22.5bn worth of home loans were handed out in August which was 15% higher than August 2015. However, in contrast to this, according to the Bank of England, the number of loan approvals for house purchase was down significantly; £4.8bn to be exact.”
Richard Pike, Phoebus Software sales and marketing director, said: “Surprisingly the figures today from the Bank of England are in stark contrast to the upbeat prediction for mortgage lending in August from the CML last week. This paints a very different picture that perhaps the seasonal lull had more of an effect than was at first thought.
“However, with reports of more properties coming onto the market in the three months since the referendum, lenders passing on the cut in interest rates and an improvement in consumer confidence it is likely that we will see some improvement as we head into Autumn.”
And Jeremy Duncombe, director, Legal & General Mortgage Club, said: “These mortgage approval figures are the first we’ve seen since the Bank of England made its historic decision to cut the Base Rate to 0.25%. The market often experiences a lull in August as fewer people look to move home or remortgage over the summer months, so these numbers are no real surprise.
“Unsurprisingly, a significant amount of the activity last month was down to remortgagers. The low interest rate environment we are currently witnessing is the perfect time for borrowers to take stock of their existing mortgage deals.”
And Matt Andrews, managing director, Bluestone Mortgages, added: “Even though today’s lending figures may show a slight softening in demand, they also confirm that growth remains broadly consistent. This should reassure many that the market is not experiencing the post-referendum turmoil that some scaremongers predicted, and is instead simply showing the effects of the summer lull.
“As momentum in the housing market begins to build, brokers will have a vital role to play in helping their customers find the best deals available, depending on their individual circumstances, whatever they may be.”
