Mortgage approvals in the UK slumped to a 1½-year low in the month after the Brexit vote, according to a high street banking report.
Loans for house purchases slipped 5 per cent to an 18-month low of 37,662 in July, down from 39,763 in June, according to the British Bankers’ Association (BBA).
The setback comes amid a good week for the property sector, with housebuilder Persimmon shrugging off uncertainty surrounding the EU referendum result to post a 19 per cent rise in pre-tax profits.
However, ultra-low interest rates allowed consumer credit to push higher – rising more than 6 per cent compared with July last year. The BBA said last month’s strong retail figures rose by a higher than expected 1.4 per cent.
Borrowing by non-financial companies bounced back to rise by £2.3 billion last month, after a small fall in June. This suggests that some businesses were still willing to press ahead with investment plans following the Brexit vote.
Decided before Brexit
Rebecca Harding, the BBA's chief economist, said the data seems to suggest that borrowing was not significantly affected by the EU referendum result. She said many borrowing decisions will have been taken before Britain formally leaves the European Union.
“We are also clearly still a nation of shoppers and the Brexit vote has done nothing to change the fact that we use credit cards for short-term purchases,” Dr Harding said. “Strong retail sales figures appear closely associated with strong consumer credit growth.
“Businesses also appear to be borrowing as usual,” she added. “The upward trend that characterised the first few months of this year is continuing. June’s data looks like a blip, probably caused by pre-Brexit nervousness.”
The BBA said gross mortgage borrowing rose 6 per cent, to £12.6 billion, in July compared with July 2015. Re-mortgaging was also 6 per cent higher in July, in contrast to 2015, and 21 per cent up in the first seven months of this year.
Samuel Tombs, chief UK economist for Pantheon Macroeconomics, said the fall in mortgage approvals was clear evidence that the Brexit vote was making households reluctant to make major financial commitments.
“The decline in approvals corresponds closely with the drop in the [Royal Institution of Chartered Surveyors’] measure of new buyer enquiries and indicators of consumer confidence, so the slowdown seems demand led,” he said.
“Lending, therefore, will revive if confidence improves. But the forthcoming stagnation of real incomes, as inflation revives and firms stop hiring, means there’s little reason to expect a substantial improvement in sentiment.”
– (PA)
