Net mortgage approvals, a key future indicator for the housing market, saw an increase from 51,100 in May to 54,7000 in June.
This reading was considerably better than expected, exceeding market expectations by 5,700, and suggests that the housing market is proving to be slightly more resilient than previously anticipated.
Despite the better than expected reading, mortgage approvals remain below the average during the late 2010s.
The effective interest rate paid on newly drawn mortgages continues to increase by a further 7 basis points to 4.63% in June, and the rate on the outstanding stock of mortgages increased by 10 basis points and now sits at 2.92%.
In May, deposits saw a significant drop. This was probably owing to a combination of three factors: a reduction in net mortgage lending, investments in gilts (which currently have attractive returns) and consumers sustaining their living standards at a time of high inflationary pressures.
However, deposits in June have returned back into positive territory, with households depositing an additional £3.4bn banks and building societies. UK businesses, most of whose loans are floating rate, continue to pay down debts with net repayments increasing from £0.4bn in May to £5.6bn in June.
So far, UK house prices have seen a peak to trough fall in nominal terms of around 4%, according to the Nationwide Price Index.
Relatively robust mortgage approval readings for June could indicate that any further correction in the housing market will be relatively modest in nominal terms, although prices in real terms space will of course continue to be significant.
June’s CPI reading, which unexpectedly came in under expectations, has helped bring interest rate expectations down which could help to further moderate the correction to UK house prices.
Daniel Mahoney is UK economist at Handelsbanken
