"A number of high street lenders have been cutting mortgage rates, but hotter than expected inflation data has cast fresh doubts on a central bank rate cut"
- Paul Heywood, chief data and analytics Officer at Equifax UK
Mortgage approvals for house purchases remained stable at 60,000 in June, the latest Money and Credit statistics from the Bank of England show.
However, approvals for remortgaging with a different lender decreased to 27,500 in June, from 29,300 in May.
Individuals borrowed, on net, £2.7 billion of mortgage debt in June, up from £1.3 billion in May. The annual growth rate for net mortgage lending rose to 0.5% in June, after a rise to 0.3% in May, continuing the trend seen in previous months.
The figures show that gross lending decreased to £20.8 billion in June, from £22.6 billion in May, while gross repayments decreased by £1.6 billion over the same period, to £18.7 billion.
This comes as the ‘effective’ interest rate on newly drawn mortgages saw a slight increase of 3 basis points, to 4.82% in June. Similarly, the rate on the outstanding stock of mortgages rose by 4 basis points to 3.65%.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Mortgage approvals for new purchases held steady, while remortgage approvals dipped although the latter may be down to borrowers sticking with their existing lender rather than going through the longer process of remortgaging to another provider.
“The effective interest rate paid on new mortgages rose again by 3 basis points to 4.82 per cent in June. This comes as no surprise although we have seen in recent days that lenders have reduced mortgage rates, particularly for new borrowers. Those coming up to remortgage will hope some better rates will be available for those remortgaging going forward, resulting in less of a payment shock.
“With inflation sticking at its 2 per cent target, an interest rate cut is increasingly likely, with some expecting it to come on Thursday. When it does happen, it will give the market a welcome boost and lenders more confidence to price their mortgage rates lower. It may even result in an uptick in mortgage approvals in coming months, particularly if successive rate reductions are forthcoming."
Nathan Emerson, CEO of Propertymark, commented: "Today’s figures show that the general election did not damage people’s confidence in borrowing money to purchase their next home in the way many may have anticipated. Momentum has sustained itself, however, now we have a newly elected government that is ambitious about building new homes, we hope that confidence increases further in the housing market. In addition, Propertymark is keen to see further confidence boosts with the Bank of England considering a cut in interest rates when they feel this is the right time to do so.”
Paul Heywood, chief data and analytics Officer at Equifax UK, added: “The latest figures from the Bank of England show an increase in mortgage lending and a fall in consumer credit borrowing as the summer gets into full swing.
“All eyes now are on the Monetary Policy Committee August base rate decision. A number of high street lenders have been cutting mortgage rates, but hotter than expected inflation data has cast fresh doubts on a central bank rate cut and we’re yet to see the fallout of England’s late Euros surge in next month’s figures. Either way, prices are still rising, we’ve seen persistent growth in highly utilised credit cards, and households will continue to feel the pinch for some time."
