Yahoo Finance August mortgage lending rises as buyers chase low interest rates
Mortgage lending in the UK rose slightly in August, beating flat expectations as buyers chase low interest rates ahead of an anticipated rise this Autumn.
But with rising inflation hitting affordability tests, and new rules for buy-to-let landlords due in October, economists predict lending levels will dip towards the end of the year.
UK Finance, a trade association which combines 300 entities including the British Bankers Association and the Council of Mortgage Lenders, today released figures for gross mortgage lending, showing a total in August of £24.2bn, up £1.2bn on July.
House purchase approvals from high-street banks also crept up to 41,807 in August, up 11pc on the same month last year, when the house market saw a post-referendum slump.
John Goodall, chief executive of buy-to-let specialist Landbay, attributed the rise in lending to buyers seeking to re-mortgage on get on the housing ladder before the anticipated first interest rise in more than a decade from the Bank of England this Autumn.
Mr Goodall also noted that the changes in regulation for mortgage applications from buy-to-let landlords due in October are likely to have had an impact on August’s mortgage activity. Under the new rules anyone looking to expand their buy-to-let portfolio beyond four or more mortaged properties may have to provide evidence of rental income and a business plan to support their mortgage application.
Despite these positive figures for August, the housing market still looks set for a downturn, according to Samuel Tombs, chief UK economist at Pantheon Macroeconomics. “Mortgage approvals remained above their post-referendum average of 40,700 in August, but the market still looks on course for a renewed slowdown. New buyer enquiries fell for the fifth consecutive month in August, according to RICS," he said.
And with consumer price index (CPI) inflation set to rise faster than wages over the next few months, fewer would-be homebuyers will pass banks’ affordability tests, added Mr Tombs.
The UK Finance figures also showed a significant increase in the rate of bank deposits from construction, up 16.8pc and real estate, up 9.2pc. Manufacturing, and retail followed behind with deposits rising 3.8pc and 3.1pc respectively.
A sense of uncertainty following the referendum is the likely cause, warned John Hawksworth, chief economist at PwC, as construction companies hold off making major property-related investments until the manner of any Brexit deal is clear.
But Mr Hawksforth was more positive in his reading of the rises in deposits in other sectors: "Growth in bank deposits has been less marked, and borrowing growth somewhat stronger, for manufacturers over the past year.
"This may reflect the benefits for many UK manufacturing companies from a weaker pound following the Brexit vote and the recent recovery in our key European export markets."
