Bank of England: Mortgage lending falls in June

Net borrowing of mortgage debt by individuals decreased to £5.3 billion in June from £8.0 billion in May, according to data released by the Bank of England (BoE) on Friday.

Though much lower than May’s net borrowing of mortgage debt by individuals – the highest recorded so far this year - last month’s figure is still above the pre-pandemic average of £4.3 billion in the 12 months up to February 2020. The BoE’s Money and Credit report also revealed that gross lending decreased to £25.4 billion in June from £28.1 billion in May, while gross repayments decreased slightly to £20.3 billion from £21.2 billion.

The BoE said that approvals for house purchases – an indicator of future borrowing – decreased to 63,700 in June, from 65,700 in May, which is below the 12-month pre-pandemic average of 66,700.

Approvals for remortgaging, which only capture remortgaging with a different lender, decreased to 44,000 in June, from 47,200 in May. This is also below the 12-month pre-pandemic average of 49,500.

For Tomer Aboody, director of property lender MT Finance, it was not surprising that mortgage approvals for new purchases decreased in June, pointing out that “some of the heat comes out of the market.”

“With improved supply levels helping satisfy buyer demand, the pace of house price growth is also likely to slow as more balance returns to the market,” Aboody explained. “With the prospect of higher mortgage rates on the cards, buyers are taking advantage of the last remaining lower rates before the inevitable spike, with those remortgaging desperate to lock into a fixed-term mortgage for as long as possible.”

Read more: UK property transactions – HMRC reveals the latest.

Geoff Garrett, director at brokerage Henry Dannell, was also not surprised with the decrease in June’s numbers.

“This more muted performance was largely expected following multiple increases to the Bank of England base rate, combined with an escalating cost-of-living and rising inflation,” Garrett said. “A previous flurry of spring mortgage market activity had reversed the steady decline in mortgage approvals seen so far this year, however, it seems as though this has been short lived, and the latest figures once again show a reduction in buyer appetites with approvals reaching their lowest point since June 2020.”

Garrett believes we will now see mortgage approvals see-saw marginally up and down from month to month as a result of seasonal influences, but he expects to finish the year at a much lower threshold when compared to the unusually high records set during the pandemic.

Jonathan Samuels, chief executive at specialist lender Octane Capital, remarked that the current economic climate had created a far less settled landscape so far this year, particularly within the mortgage market.

“This is starting to show with a reduction in mortgage approvals, but we are yet to see any concrete signs that the pandemic property market boom is starting to subside,” he added. “With the market maintaining a good level of momentum, we expect that mortgage approvals will tread water between 60,000 to 65,000 approvals a month for the remainder of the year. Some way off the dizzying heights of the pandemic, but a return to pre-pandemic normality.”

The latest mortgage approval figures will bring no cause for celebration, but they are certainly no cause for panic either, according to Almas Uddin, founding director of Revolution Brokers.

“The preventative pandemic measures implemented by the government to keep the property market up and running have now worn off, and we’re unlikely to see a booster jab in the form of any new initiatives in 2022,” Uddin said. “Despite this, the current level of mortgage market activity remains there or thereabouts when compared to a less frantic, but consistently steady pre-pandemic property market.”