The number of mortgages approved by British banks went up in July for the first time in six months, a sign the housing market could be gaining momentum following a period of political uncertainty.
According to figures from UK Finance, the new trade association which has replaced the British Bankers’ Association, 41,587 mortgages were approved in July, up 3% on the previous month.
Remortgaging approvals of 26,133 were up on the monthly average of 25,284 over the previous six months and 3% higher than in July 2016.
Monthly gross mortgage borrowing exceeded expectations, going up 4% to £23 billion in July.
So far this year, demand from first-time buyers and remortgagers has been driving the housing market, supported by attractive mortgage rates.
Buy-to-let lending had a weak start to 2017 and the sector’s contribution to overall net mortgage lending has fallen considerably over the last year following the introduction of a raft of new regulations.
UK Finance said it expects the pace of first-time buyer and remortgage activity to slow as the economic outlook becomes more “challenging”.
The Bank of England expects UK inflation to rise further in the coming months, peaking around 3% in October before gradually dropping to 2.2% over the three-year forecast.
This is likely to put further pressure on households already feeling the pinch from rising prices and stagnating wage growth.
Eric Leenders, head of personal banking at UK Finance, said: “Steady levels of mortgage activity seen through the first half of the year continued into July.
“First-time buyer numbers continue to be strong, helped in part by government schemes. But that has been offset by homemovers, where a shortage of homes on the market is limiting their activity.”
The housing market has come under increasing pressure in recent months from the growing squeeze on incomes and affordability pressures.
Experts believe the ongoing uncertainty surrounding Brexit compounded by the snap election have also contributed to the slowdown in the housing market.
Since last year’s Brexit vote, consumers have faced a loss in spending power as a result of rising inflation following a fall in the pound.
Combined with slowing wage growth, households are beginning to feel the pinch as their disposable incomes start to fall.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “These figures are interesting because we are seeing lending fairly steady on all fronts at a time when we might have expected more turmoil in the market, given the results of the general election and the commencement of formal Brexit negotiations.
“At the coalface we have seen a continuing determination of first-time buyers in particular to take advantage of landlords being distracted by higher entry costs and stiffer regulation to buy at more competitive rates, underlining their confidence in the long-term future of the market.”
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