Bank of England mortgage approvals up but "Autumn Budget could seriously disrupt the market"

Despite ongoing affordability challenges, economic uncertainty and the looming Autumn Budget, mortgage approvals for house purchases increased by 800 to 65,400 in July, according  Bank of England data published today. Approvals for remortgaging, which only capture remortgaging with a different lender, decreased by 2700, to 38,900 in July.

Net borrowing of mortgage debt by individuals decreased by £0.9 billion to £4.5 billion in July, compared to a £3.2 billion increase of net borrowing to £5.4 billion in June.

The annual growth rate for net mortgage lending slightly rose from 2.8% to 2.9% in July. Gross lending increased to £24.3 billion in July, from £24.0 billion in June. Gross repayments also rose in July, to £19.7 billion, from £19.2 billion in June.

Stephen Perkins, Managing Director at Norwich-based Yellow Brick Mortgages, said summer was busy but is concerned about the forthcoming Budget: “July and August were busy months for us despite lots of uncertainty facing many potential buyers. The school holidays also didn’t seem to dampen demand, but after all the fiscal rumours of the past few weeks, there is every chance the Autumn Budget could seriously disrupt the market.”

Katy Eatenton, Mortgage & Protection Specialist at St Albans-based Lifetime Wealth Management, also said activity levels have held up: “There's life in the mortgage market and people are still borrowing but affordability, while improving, is still proving an issue for some aspiring buyers.

"Overall, activity levels held up fairly well over the summer and they are likely to increase in September, usually a busy time for the market as people do their best to get into their new homes before christmas. One worrying trend is the rise in down valuations, which practising brokers are seeing across the board.”

Daniel Hobbs, CEO at Rayleigh-based New Leaf Distribution, said the Budget could see many buyers sit on their hands: “This slight increase in mortgage approvals suggests the mortgage market is still firing but by no means on all cylinders. Affordability is still stretched and confidence in the economy is hardly great at present.

"Even the Bank of England rate cut last month didn't deliver the boost in confidence that it might ordinarily have. Moving forward, the fast-approaching Autumn Budget could see many prospective buyers wait and see before committing.”

Chris Barry, Director at London-based Thomas Legal, added: “The amount of buyers coming to market is down, even though official interest rates are gradually reducing. There's no doubt that many buyers are waiting for house prices to come down before making their move. Buyers are also thinking twice about investing in property due to speculation of further increases to taxes on second homes or buy to lets. There's a lot of uncertainty right now.”

Michelle Lawson, Director at Fareham-based Lawson Financial, said she has seen some “mind-boggling” down valuations of late: “The past few summer months have been incredibly busy with a mix of business, from residential owner-occupier to buy-to-let. I suspect some people have been making hay while the sun still shines before tax robber Reeves’ October raid on our pockets.

"The only pattern we are seeing is down valuations on buy to let applications,. I’ve had some down valuations of up to 50%, which is mind-boggling.”

In July, the Bank of England data showed, net borrowing of consumer credit by individuals slightly rose to £1.6 billion, from £1.5 billion in the previous month. Within this, net borrowing through credit cards slightly increased to £0.8 billion in July, from £0.7 billion in June. Net borrowing through other forms of consumer credit (such as car dealership finance and personal loans) increased to £0.9 billion in July, from £0.7 billion in June.