Bank of England (BOE) data shows there was £1.3 trillion of outstanding mortgage debt in the UK at the end of August 2016. Their figures also show the number of mortgage approvals fell in August to an almost two-year low amid Brexit-related concerns over the housing market.
The BOE said there were just 60,058 mortgages approved for house purchase in August, down from July’s 60,925. In January 2016 there were 73,490 mortgage approvals and in August 2015, the total was 71,491.
“The slowdown in approvals highlights the growing uncertainty across the UK’s housing market,” said Hammersmith estate agent, Lawsons & Daughters “While there was some positive data on spending and economic growth during July and August, warnings and uncertainty over what Brexit will entail appear to have dampened home-buyers and lenders’ appetite.”
Looking across the whole of the third quarter, the BOE has also published its findings of the underlying credit conditions through the difficult period between July and September along with expectations for the final quarter of the year.
The Credit Conditions survey showed availability of mortgage loans in the three months to September was considered to be unchanged from the second quarter. Survey respondents also said they expected no change in the availability of mortgages in the fourth quarter of this year. However, they stated that credit scoring criteria had tightened in the third quarter and that fewer home loan applications were approved during the period.
In addition, the BOE’s survey highlighted that demand for mortgage loans fell in the third quarter, with significant declines reported for both prime and buy-to-let (BTL) applications. Lenders said they expected demand for mortgage loans across the board to increase between October and December.
“The tighter credit scoring conditions for mortgage loans suggests lenders are exercising more caution over their lending in light of the uncertainty Brexit has unleashed,” said M&M Property, estate agent based in Newington Green. “But they’re not the only ones, lower demand for mortgages indicates consumers and home-owners are a little worried about what the future holds too.”
The latest figures clearly show that despite some pockets of positivity from other economic data on spending and manufacturing, the housing market is not performing as strongly as it has done in the past. While uncertainty over Brexit is most certainly a key reason behind this, there is also evidence that the new rules on stamp duty and other details relevant to BTL landlords has led to a slowdown in investment.
Indeed, such is the uncertainty over the future of the UK’s economy, that a broker from a prominent UK mortgage company has warned home-owners and buyers not to agree to a short-term fixed rate mortgage because they might face higher than expected rates once the deal ends.
Speaking to This is Money, John Charcol broker, Alistair Hargreaves said that while a two-year mortgage rate of 1% or less might look tempting, it could prove to be “a false economy”. He adds that anyone looking to get a new mortgage or re-mortgage should be looking at the longer term deals in order to avoid a hefty increase during a period of economic uncertainty.
Regents Park estate agent, Kubie Gold agrees: “The idea of saving some money on your monthly mortgage payment always sounds like a good idea. But, you have to be sensible and think about the longer-term, if rates rise or jobs and wages fall, then you could be in a tight spot with a much higher monthly repayment once those two years on the ultra-low deal are up.”