Mortgage borrowing increased to £4.4bn in August

The latest Bank of England Money & Credit statistics for August find that mortgage borrowing increased to £4.4 billion in August, from £4.1 billion in July, but remained below the previous 6-month average of £5.2 billion.

Net mortgage approvals for house purchases – an indicator of future borrowing – decreased to 54,900 in August, down from 55,900 in July and below an average of around 60,100 over the previous 6 months. Approvals for remortgaging decreased to 34,000 in August, from 34,600 in July.

The annual growth rate for net mortgage lending remained unchanged at 3.6% in August. Secured gross lending decreased to £23.6 billion in August, down from £25.3 billion in July, and below the six-month average of £26.5 billion.

Repayments decreased slightly in August to £20.4 billion, from £ 21.1 billion, below the six-month average of £21 billion. Remortgaging decreased to 34,000 in August, from 34,600 in July. The Bank’s figures only cover remortgaging with a different lender.

Richard Pinch, Senior Director at  Broadstone, said “Higher borrowing costs and continued macroeconomic uncertainty are slamming the brakes on the mortgage market, with approvals for both purchases and remortgages falling again in August. Despite some of the green shoots of economic recovery we have seen through the year, affordability pressures are clearly still biting as households head towards another challenging winter.

“The sharp rise in consumer credit borrowing, particularly on credit cards, suggests more households are leaning on credit to absorb everyday cost pressures. For lenders, the priority must be to identify signs of financial strain as early as possible and ensure borrowers have access to appropriate support and flexibility before temporary affordability pressures become more serious.”

John Phillips, CEO of Just Mortgages and Spicerhaart, said “Given it is prime holiday season, we shouldn’t be too surprised to see mortgage approvals dip in August – especially when you also consider the headwinds the market has been battling. While we did see some positive movements from lenders in August, rate volatility was rife as swap rates responded to the uncertainty caused by the ongoing conflict in the Middle East. Rates have only seemed to move in one direction since then, but despite this, we’ve been encouraged by a modest uplift in buyer registrations and valuation requests in September. It’s a good sign that there is still people out there looking to make moves and to buy.

“There’s no question that there’s some element of wait and see right now ahead of the Budget. The hope is that this gives way to some pent-up demand – particularly as we find out more about the new Your First Home scheme. Like we’ve seen with other headline products that have come to the market recently, it is likely to generate interest and enquiries, creating fresh opportunities for advisers to discuss the full range of options available to first-time buyers. As we head into the final quarter of the year, advisers need to be proactive and share the opportunities that still exist in the current market.”

Alex Beavis, Interim Director of Banking at LHV Bank, said “That Brits are succeeding in putting more money aside is hugely encouraging. Household budgets are under strain, with inflation rising once more, so it would be easy to see saving become less achievable. However, last week GfK’s Consumer Confidence Barometer hit a two-year high, with people becoming slowly more confident about their own financial prospects. It may also be that they are acting now in order to build an emergency fund – ONS research this year found that one in four adults could not afford an unexpected £850 bill, while our own study suggested that the majority (57%) of savers could only cover three months or less of essential costs, despite saving money to cover an emergency.

“However, saving more does not automatically mean people are seeing an adequate return for their efforts. With bank base rate expected to increase in the months ahead, savers should be able to secure an improved deal on their balances, but that will only happen if they are diligent in shopping around and ensuring they are securing a competitive return on their savings, rather than putting up with mediocre interest from accounts which have been left behind. It’s not enough to be disciplined in saving money on a regular basis – you will only truly see the benefit if you put the same level of effort into determining where to save your money.”