Purchase and remortgage approvals jump in June
The number of mortgage approvals for purchase and remortgage rose in June, data from the central bank revealed.
The Bank of England (BoE) Money and Credit figures showed that the net approvals for house purchase mortgages totalled 54,700 in June which was the highest level since October last year. This was also up on 51,100 in May.
However, the level of approvals were below the monthly average of 62,700.
Approvals for remortgaging rose from 34,100 in May to 39,100 in June.
Steve Seal, CEO, Bluestone Mortgages, said: “While it’s positive to see a slight uptick in the number of mortgage approvals, worse could be yet to come. We are still facing strong economic headwinds, and as lenders continue to increase rates and pull deals, affordability will remain a key challenge for would-be and existing borrowers.
“While the outlook may appear to be gloomy, it is our industry’s duty to remind people that the homeownership dream can still live on.”
In June, net borrowing of consumer credit rose to £1.7bn, the highest since April 2018.
Tracker mortgage popularity
Nick Mendes, mortgage technical manager at John Charcol, said the shift in product choice had resulted in the rise of activity.
He added: “The increase in July’s activity will no doubt be driven by a demand for tracker products. We have seen an uptick in the number of customers looking at trackers. Now we are starting to see a shift in dynamic, where inflation is starting to ease, people are trying to hedge against where interest rates will go. Borrowers can see the implications of being tied into a fixed rate deal when rates could fall in the next six to twelve months.”
Mortgage lending rises
Gross mortgage lending rose for the second month in a row, from £19bn in May to £20bn in June. Gross mortgage repayments also increased from £19bn to £19.8bn month-on-month.
The net borrowing of mortgage debt rose to £100m.
The average interest rate on newly-drawn mortgages rose by seven basis points since May to 4.63% in June. The average rate on the outstanding stock of mortgages rose by 10 basis points to 2.92%.
Alice Haine, personal finance analyst at Bestinvest, said higher interest rates had “failed to weigh on mortgage lending”.
She added: “This may be the calm before the storm, with mortgage lending likely to remain weak over the coming months as lenders grapple with the high interest rate, high inflation rate environment.
“Inflation has now eased slightly to 7.9% and is likely to retreat further over the course of the year, offering relief to borrowers. Despite the improving outlook, the BoE is widely expected to increase interest rates by 25 basis points at its meeting this Thursday, as it continues its mission to bring rising prices under control.”
“While this is an improvement on the feared 50 bps hike, mortgage rates are likely to plateau in the coming weeks rather than retreat dramatically despite an improving interest rate outlook – though there are better times ahead.
“Average mortgage rates eased slightly towards the end of last week after several major lenders cut rates amid improving interest rate expectations, with hopes more lenders will follow suit this week,” she added.