Experts are unsure whether slump reflects seasonal lull or broader slowdown that could hit valuations
Mortgage borrowing fell markedly in the first month following the vote for Brexit, according to figures published yesterday by the Council of Mortgage Lenders (CML).
Experts are unsure whether the slump reflects pre-existing factors and the usual seasonal summer lull, or if it is a symptom of a market slow-down post-referendum that will ultimately drag house prices lower.
In total £10.9bn was borrowed across 58,100 loans in July, down by 13 and 14 per cent respectively compared to June.
First-time buyers took out £4.4bn through 28,200 loans in July, down almost a fifth on the previous month. Home movers also borrowed less – around nine per cent.
Remortgagers taking advantage of record low rates, on the other hand, secured loans worth seven per cent more than in June. The £6bn total was the highest in seven years, notes The Times.
The decline in lending to people buying new properties could be a sign of a slower-transaction market amid the economic uncertainty caused by Brexit – but there are mitigating circumstances.
Firstly, the month-on-month comparisons are skewed by the fact that June was exceptionally strong in terms of house sales. There was a 26 per cent surge in lending and first-time buyer borrowing hit a nine-year high.
July’s house sale figures could be indicative of a return to the usual summer lull, says Brian Murphy of the Mortgage Advice Bureau, after an atypical 2015 that was boosted by a surprisingly clear general election result.
The CML’s Paul Smee says the slide could have been set in train before the referendum and might reflect a natural ebb after a flood of lending ahead of stamp duty changes that affected buy-to-let investors in April.
As the CML figures are based on actual mortgage advances rather than approvals, they might relate to a slowdown that began before the EU vote on 23 June, he added.
For others the data is a sign that the market is cooling. This could yet translate into slower house price growth or even modest declines as we head into 2017.
Howard Archer at IHS Global Insight told the Daily Telegraph: “With the economy currently showing resilience following June’s Brexit vote, we now expect house prices to be essentially flat over the final months of 2016.
“However, we still believe that a dip in house prices is likely in 2017, probably by around three per cent to five per cent.”