Net lending for mortgages increased to £4.1 billion in March. Mortgage approvals for house purchase, which give an indication of future mortgage lending, fell to 62,300. Whilst, UK businesses raised £1.1 billion of net finance in March, with strength in bond issuance partially offset by net repayments in the equity market.
Commenting on the figure Jane Tully, Director of external affairs at the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said “Although the rate of consumer credit growth is easing, the amount owed continues to creep up, and now stands at £216.7bn. For the majority of households, meeting repayments is unlikely to be an issue at the moment.”
“However, challenges remain for a significant minority of people struggling to cover essential day-to-day costs and where credit is often used to plug gaps in household budgets. Nearly one in four (37%) callers to National Debtline surveyed last year said they put food or groceries on credit with one in five (19%) using credit to pay for energy bills.”
George Robbins, Director of financial services at TransUnion said “The latest monthly Money and Credit statistics from the Bank of England reveal a mixed picture. Consumer credit was up by £0.5 billion, showing that even the continuing Brexit uncertainty hasn’t put a stop to spending. However, the increase is the lowest since November 2013, which is not overly surprising, as consumers tread carefully and banks and finance providers tighten up on their lending criteria.”
“In particular, a drop in lending for new cars was a major factor in slowing growth. However, alongside this, credit card lending saw an increase for the first time since last June, suggesting that consumers are perhaps more reluctant to consider large purchases or long-term loans in the current economic climate, but are keen to utilise flexible borrowing, such as credit cards, to meet their funding needs.
“Mortgage approvals dropped last month, which may indicate a forthcoming reduction in mortgage lending on the horizon. However, for March, there was in fact an increase of £0.8 billion in borrowing against properties, helping to maintain growth in the housing market, albeit at much lower rates than we’ve seen previously. Approvals on remortgages went up slightly last month, suggesting consumers are still keen to take advantage of continued low interest rates and use their properties to boost their financial security.”
John Phillips, Operations Director at Just Mortgages and Spicerhaart said “The mortgage market has been struggling for some time now, with the annual growth rate of mortgage lending remaining at around 3% since 2016. Brexit is clearly still having a huge impact – although it is not in the news so much at the moment and as we move into the warmer months, we may start to see a rise in approvals for purchases, but I think there are bigger issues at play; the main one being stamp duty.”
“Last month, the House of Lords Committee on Intergenerational Fairness and Provision recommended changes to stamp duty as it is “seriously distorting the market” and I think a major shakeup could be the answer. Stamp duty makes up such a huge proportion of the cost of moving that many of those who want to upsize are choosing to extend instead, while those who want to downsize are staying put in what is often an unsuitable sized home “The stamp duty freeze for first-time buyers has had a hugely positive impact for that end of the market with first-time buyer mortgage approvals huger than ever. But in order to help the whole market, something needs to be done to help everyone else. Ideally, stamp duty would be abolished altogether, but significant cuts would be a good start.”
Richard Pike, Phoebus Software Sales and marketing director, said“The Bank of England figures this morning show quite a mixed picture when you look at the increase in overall mortgage lending, but the fall in approvals in the month. When you consider the recent HMRC report, which shows property transactions falling, these latest figures bear out predictions that as we approached the Brexit deadline people were becoming more cautious.”
“However, as fed up as everyone is, with all that is being thrown them from the political arena, the time will come when caution is simply thrown to the wind and personal needs will overtake. Then we’ll see how well the housing market copes with demand. That being said, it would be a very brave person that would put their hat in the ring with concrete predictions for the coming months.”
