In the latest Money and Credit statistics released by the Bank of England, net borrowing of mortgage debt by individuals saw an increase to £0.1bn in June, rebounding from net repayments of £0.1bn in May and a record high net repayment of £1.1bn in April, excluding the period since the onset of the Covid-19 pandemic.
The data also revealed a marked increase in net mortgage approvals for house purchases, which rose from 51,100 in May to 54,700 in June. Approvals for remortgaging also experienced growth during the same period, climbing from 34,100 to 39,100.
Meanwhile, the “effective” interest rate on newly drawn mortgages continued to rise, registering an increase of a further 7 basis points to reach 4.63% in June. This sustained increase in the actual interest rate paid is reflective of the broader economic trends in the mortgage market.
Notably, net borrowing of consumer credit by individuals surged to £1.7bn in June, hitting the highest level since April 2018. This increase points to a robust consumer spending environment and a potential shift in borrowing behaviours.
Reaction
Steve Seal, CEO, Bluestone Mortgages:
“While it’s positive to see a slight uptick in the number of mortgage approvals, worse could be yet to come. We are still facing strong economic headwinds, and as lenders continue to increase rates and pull deals, affordability will remain a key challenge for would-be and existing borrowers.
“For those who are concerned about the current environment and how it will impact their homeownership goals, now more than ever is the time to seek advice from a mortgage broker. These professionals are here to support existing and potential borrowers and will be able to signpost them to the best available options tailored to their personal circumstances. While the outlook may appear to be gloomy, it is our industry’s duty to remind people that the homeownership dream can still live on.”
Conor Murphy, CEO and founder, Smartr365 and Capricorn Financial Consultancy:
“The sun continues to shine on the UK property market, with activity holding up in the face of the wider economic slowdown. The summer months are typically busier due to the weather improving property photography and making moving easier, while also allowing families to move between school terms.
“Besides the weather, activity is also buoyed by stabilising house price inflation, and competitive pricing from lenders. Widespread tech integration will be key to capitalising on this strong demand. Comprehensive, end-to-end systems, which can house a range of tech tools, are key to streamlining time-intensive admin tasks, giving advisers more time to make the most of this bright spell.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“Mortgage approvals ticked up again in June to the highest level seen since October although buyers remain concerned as to what’s going on in the wider economy and what they can afford.
“The average rate on new mortgages continued to rise in June, increasing by 7 basis points to 4.63%. The worst of the pain may not be over with the Bank of England poised to raise the base rate again later this week.
“Swap rates, which underpin the pricing of fixed-rate mortgages, and have been exceptionally volatile in recent weeks, have settled down since the encouraging dip in inflation. A number of lenders, including HSBC and Barclays, have reduced their fixed rates and borrowers will be hoping other lenders follow suit in coming days and weeks.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“Write the housing market off at your peril. Showing considerable resilience again, mortgage approvals are still on the up despite the inevitable time lag in these figures, reflecting activity a few months ago when the market was still recovering from post-mini-Budget blues.
“What we are finding on the ground is that since the succession of interest rate rises over the past few months, proceedable buyers are taking more time to weigh up the greater choice of available properties. They are also carrying out their own stress testing before taking advantage of their stronger position in the market.”
Simon Jones, CEO of investing comparison platform, InvestingReviews.co.uk:
“Though the cost of new mortgages rose again in June, the number of mortgages agreed for house purchase also edged up. The property market is far from buoyant, with mortgage approvals below the monthly average in 2022, but June’s marginal uptick on May shows that people have recalibrated to the new rate environment and are getting on with their lives.
“Worryingly, however, this data shows the growing reliance on credit as people’s finances are stretched to breaking point. In the current brutal climate, many people are having to take out personal loans and rely on plastic just to get by.”
Riz Malik, director of Southend-on-Sea-based independent mortgage broker, R3 Mortgages:
“It’s no surprise that consumer credit rose to £1.7bn in June, the highest level since April 2018. Unsecured credit utilisation will continue to remain high while mortgage rates are as high as they are and the cost of living crisis continues. At least, they will remain high until the lines of credit are taken away.
“However, August is set to be a pivotal month for mortgages and the cost of living more widely. We will soon discover if the Bank of England will imitate the Federal Reserve’s actions and hike the base rate by 0.25%. On the 16th, the inflation data will lay the groundwork for those considering remortgaging in 2023.
“Should the inflation numbers be better than anticipated, the recent downward trend we’ve observed in mortgage market prices could potentially carry on and that may see mortgage approvals continue to edge up. The mortgage market is quiet right now, but based on this data it’s not quite on the canvas.”
Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com:
“Debt is definitely becoming an issue with a lot of mortgage borrowers and this is evident in this data. With credit card balances rocketing simply to fund the cost of living, on top of car finance and unsecured loans, it’s not uncommon for a couple to have £10,000 to £20,000 of debt between them, which can severely dent their maximum borrowing capacity. Most economists predict the Bank of England will increase the base rate by 0.25% this week. However, I don’t see it having a significant bearing on mortgage rates as they’ve already risen so much over the past couple of months.”
Adam Oldfield, chief revenue officer at Phoebus Software:
“The figures from the Bank of England this morning tell two distinct stories. One that shows that no matter what the naysayers believe there is still an appetite to purchase property. The other story is perhaps what we have been expecting to see, that consumers are starting to rely more on credit as the rising cost of living bites.
“On this Consumer Duty Day, when all financial services come under the spotlight, this level of consumer borrowing is the biggest indication to date that consumers are looking to spread the cost of their spending. It is an opportunity for everyone in our industry to show that everything we do is with our clients’ very best interests at heart. For lenders especially, this is a time to ensure that all the right systems and people are in place to ensure Consumer Duty is at the forefront of everything they do going forward.”
Terry Woodley, MD of development finance at Shawbrook:
“Though June shows a further rise in approvals, this is typical of the summer season and doesn’t paint the full picture. Developers remain concerned about a market slowdown in the face of interest rate rises and economic pressures.
“Developers will be looking to complete work on current properties as soon as possible to mitigate the impact fluctuating rates have on buyer confidence. Retrofitting and renovations continue to be at the forefront of developers’ plans, especially to cater for a rental market currently being starved of quality, affordable stock. Developers will need to revisit their strategy and adapt. This could mean looking at new locations and property types or focusing more on segments such as the houses in multiple occupation (HMO) sector.”
