6 UK mortgage borrowing picked up slightly in June, suggesting the housing market may be regaining some stability after stalling in the run-up to the original March Brexit deadline.
Figures released by the Bank of England on Monday showed mortgage approvals for house purchases — an indicator of future lending — increased by about 800 to 66,400 in June, slightly higher than analysts had expected and above the monthly rate of 60,000 projected by the BoE in its May inflation report.
Households’ net mortgage borrowing of £3.7bn was also higher than in May, although the annual growth rate of mortgage lending remained stable at 3.1 per cent — around the level it has been at since the vote to leave the EU in 2016. Brexit-related uncertainty and political turmoil has weighed on UK property markets, with house price growth slowing across the country and prices falling sharply over the past year in London.
However, the most recent data have pointed to a modest improvement, with surveyors polled by RICS, the industry association, becoming less pessimistic about market dynamics.
Howard Archer, economist at the consultancy EY Item Club, said the reprieve from a disruptive Brexit in March, together with better consumer purchasing power and strong jobs growth, had helped, although “the overall benefit has been relatively limited”. The BoE data also showed a slight increase in consumer credit growth, which rose by £1bn in June, compared with £0.9bn in May.
However, the annual growth rate — which has fallen steadily since 2016 — continued to slow, falling to 5.5 per cent in June from 5.7 per cent a month earlier. Within this, the annual rate of growth in credit card lending has also slowed. Consumers’ apparent restraint could be a worrying sign, since household spending has been the main driver of economic growth in recent months.
Businesses have been reporting slowing activity and recent data suggest the economy may have flatlined in the second quarter, but households have benefited from record employment, modest tax cuts, a lift in public sector pay and the latest rise in the national minimum wage. Samuel Tombs at Pantheon Macroeconomics consultancy said that since lenders no longer planned to reduce the supply of consumer credit, the data were “consistent with the economy retaining momentum ahead of the Brexit deadline”.
The BoE data also showed a pick-up in borrowing by non-financial companies — largely in the form of bank loans and corporate bonds. Mr Tombs saw this as positive, arguing that demand for external finance would be falling if the slump in business investment was worsening. He also noted that net issuance of commercial paper — a way to raise short-term funds — was falling, after a spike in the first quarter of the year, when companies were struggling to find cash for pre-Brexit stockpiling.