Mortgage Approvals Slump To 18 Month Low After Brexit Vote

The number of mortgages being approved hit an eighteen month low in July according to a report by the British Bankers’ Association.

The figures show house loans dipped 5% to 37,662 in July, down from 39,763 in June a month after the Brexit vote.

That compared to a peak of 46,386 loans in January.

Mortgage approvals were down 18.7% year-on-year in July, from 46,287 in July 2015.

Gross mortgage borrowing rose 6% to £12.6bn in July, compared to the same month last year, whilst re-mortgaging was also 6% higher in July in contrast to 2015.

"Mortgage approvals for house purchases have progressively slowed after being buoyed in the first quarter by buy-to-let and second home sectors rushing to beat April's stamp duty increase," said Howard Archer, chief UK and European economist at HIS Global Insight.

Despite the drop in mortgage approvals, the property sector is displaying resilience.

Housebuilder Persimmon has bounced back after a brief Brexit hit, posting a 19% rise in pre-tax profits this week.

Dr Rebecca Harding, BBA chief economist, said: "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.

"Businesses also appear to be borrowing as usual: the upward trend that characterised the first few months of this year is continuing.

"June's data looks like a blip, probably caused by pre-Brexit nervousness."

The Brexit vote also appears to have done little to change the nation's shopping habits.

Boosted by ultra-low interest rates, consumer credit, such as spending on credit cards, rose by more than 6% in July, compared to the same month last year.

In addition, retail figures rose to a higher-than-expected 1.4% in July, as the warmer weather boosted clothing sales.

However, Samuel Tombs, chief UK economist of Pantheon Macroeconomics, said the fall in mortgage approvals was clear evidence the Brexit vote was making households reluctant to make major financial commitments.

He said: "The decline in approvals corresponds closely with the drop in RICS' measure of new buyer enquiries and indicators of consumer confidence, so the slowdown seems demand led.

"Lending therefore will revive if confidence improves, but the forthcoming stagnation of real incomes, as inflation revives and firms stop hiring, means there's little reason to expect a substantial improvement in sentiment."