UK Finance: Mortgage lending rises in October driven by base rate increase
UK mortgage lending was 14% higher in October year-on-year driven by strong remortgage and first-time buyer activity, UK Finance data has revealed.
There was £23.1bn of lending in October, with high street banks making up two thirds at £15.3bn.
Mohammad Jamei (pictured), senior economist at UK Finance, said: “The anticipated bank rate rise saw a flurry of remortgage activity as many homeowners took advantage of the competitive rates on offer.
“Borrowing was also boosted by stronger first-time buyer activity as this segment benefitted from good credit availability, lower rates and government housing schemes.
“In terms of saving, consumer deposits grew at a slower rate in October, while businesses have continued the trend of bolstering their cash reserves amidst a cautious business landscape due to Brexit uncertainties.”
Henry Woodcock, principal mortgage consultant at IRESS, said: “The remortgage market was already building a head of steam going into October with a spike of 20% in September, with 78% of completions being remortgages.
“The Bank of England had signposted the raising of interest rates ahead of the decisive MPC vote on 2nd of November, which undoubtedly encouraged borrowers and applicants to secure the best fixed rate deals before lenders increased rates.
“Although house prices across England and Wales have slowed in recent weeks, the market has shown remarkable resilience, despite uncertainty around Brexit and base rate increases. But any growth continues to be overshadowed by a lack of supply and, although the government plans to stimulate housebuilding, it will take some time to show its influence.”
He added: “However, Wednesday’s budget contained some news which could help breathe life into the market.
“The Chancellor listened to the clamour to cut stamp duty in England, Wales and Northern Ireland to zero for first-time buyers.
“This is not a tax holiday as many thought, but rather an abolishment of duty for properties up to £300,000. And where prices are very high, such as London, this also includes the first £300,000 of purchases up to £500,000. The move has been greeted with cautious optimism, so it will be interesting to see how this plays out.
“Mr Hamond also announced £44bn to support the housing market, including building high density housing in city centres and transport hubs. It remains to be seen what measures will be put in place to ensure affordable and social housing has a fair share of the £44bn.”