The number of mortgage approvals fell to an 18-month low in July following the EU referendum, new figures how.
According to the British Bankers’ Association, house purchase approval numbers fell 5% In July to 37,662, down from 39,763 in June.
Gross mortgage borrowing was £12.6 billion in July, 6% higher than the previous year.
Dr Rebecca Harding, BBA chief economist, said the EU referendum has failed to have a significant impact on borrowing.
She said: “This month’s BBA high dtreet banking statistics are the first set of borrowing figures gathered since the EU referendum. The data does not currently suggest borrowing patterns have been significantly affected by the Brexit vote, but it is still early days. Many borrowing decisions will also have been taken before the referendum vote.
“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. Strong retail sales figures appear closely associated with strong consumer credit growth.”
In the run-up to April’s stamp duty hike there was a boom in borrowing as buyers brought forward transactions to beat the deadline.
The housing market has also been hit by uncertainty over the impact of the EU referendum, with many buyers adopting a more cautious approach and putting off purchases.
Economists believe housing market activity is likely to slow in the coming months and prices will weaken as uncertainty following the Brexit vote continues to weigh on consumer confidence.
To help boost growth the Bank of England has cut interest rates from 0.50% to 0.25% – the lowest on record. It is the first interest rate cut since 2009, when the financial crisis was at its peak.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘The first set of lending figures post referendum show little signs of panic although those decisions to borrow would have been made before the outcome was known.
“House purchase approvals are lower than July last year although remortgaging was higher as borrowers took advantage of record low mortgage rates. July and August are always traditionally quieter times of the year for the market; the real test will come in September when people get back from holiday. Then we will see whether they are making decisions to buy or whether they put these on hold until there is further clarity.
“Remortgaging is likely to go from strength to strength. This is not so much because borrowers fear a rate rise: rather mortgage deals are so cheap, in particular fixed rates, that it seems crazy not to snap one up. What remains to be seen is how long lenders retain their appetite to lend at such low rates.”
Countrywide predicts house prices will fall in the next year by 1% as a result of the economy weakening following the vote to leave the EU.
The company expects the housing market to be hit by uncertainty surrounding the arrangements for leaving the EU and the effect this will have on trade and future economic growth.
Prices will fall as a result of declining consumer confidence, shrinking household incomes and increasing unemployment.
