Gross mortgage borrowing of £8.9bn in June was higher than in May and the average over the previous six months, according to latest data from the British Bankers’ Association (BBA).
Higher capital repayment (including homeowners moving between lenders) continues to generate the contractions in borrowing stocks seen over the past year and explains the subdued picture of net borrowing, the BBA said.
The numbers of approvals for house purchase and remortgaging continued the upward trend seen since the turn of the year and were both some 33% higher than last year. Assistance schemes for mortgage lending are also expected to help more first-time buyers and housing chains generally. The average house purchase approval rose to £160,100.
Approvals in June for loans other than house purchase or re-mortgaging continue to be stable, reflecting lower available equity or homeowners reluctant to take on extra borrowing.
BBA statistics director, David Dooks said: “Second quarter GDP is expected to have strengthened and as economic conditions improve the banks are providing the finance to help growth. In June, £9 billion of new mortgages and a small rise in consumer credit were accompanied by a net increase in lending to businesses.
”However, household savings, though still growing at 5%, seem to be slowing.”
Jonathan Harris, director of mortgage broker Anderson Harris, said: “The mortgage market continues to improve with borrowers attracted by lower rates and easing criteria. Help to Buy is already helping first-time buyers and is expected to give a further boost to this group, as well as second steppers, from January when the guarantee element of the scheme is rolled out.
“There are fears in some quarters that mortgage rates will start increasing soon on the back of rising Swap rates but there are many other factors coming into play which dictate pricing. There is no need to panic but it is worth seeking independent mortgage advice if you are concerned. We expect mortgage rates to continue to be extremely competitive in coming months as lenders vie for business.
“Borrowers who can afford to do so continue to overpay on their mortgages, taking advantage of record low interest rates, and pay down debt where they can. This makes sense – why leave savings languishing in accounts paying such poor rates of interest when you can reduce your borrowing? There is also a reluctance to take on extra borrowing because of the uncertain economic and jobs climate.
“While lending volumes are improving, we remain some way off a sustained recovery in the housing market as caution continues to prevail. However, mortgage brokers and estate agents are still reporting a high level of enquiries so we expect this to continue to feed through to improved official figures in coming months.”
