The British Bankers’ Association (BBA) has reported that house purchase approval numbers in September 2016 were 15% lower than in September last year.
Furthermore, in the first nine months of 2016 approvals were 3% lower than in the same period of 2015.
The BBA said that consumer credit continues to show annual growth of over 6% despite only moderate retail sales growth supported in the case of personal loans and overdrafts by favourable interest rates.
Meanwhile, borrowing by non-financial companies fell by £0.3bn in September following a small decline in August.
Dr Rebecca Harding, BBA chief economist, said: “Consumer credit is growing at its fastest rate since December 2006, driven by strong demand for personal loans and credit cards. Consumers are increasingly using short-term borrowing to take advantage of record low interest rates. This trend has accelerated since the Bank of England cut rates in August.
“Mortgage approvals picked up slightly this month but the housing market continues to shows signs of underlying weakness. Both house purchase and remortgaging approvals are down on the corresponding figures for 2015.
“Business borrowing decreased slightly again in September, which may be in part down to uncertainty following the EU referendum. There is a longer time lag behind corporate investment decisions so it may take longer for the effect of the interest rate cut to filter through to such borrowing.”
Andy Knee, chief executive of LMS, added: “Three months on from the vote to leave the European Union, the latest BBA figures suggest that home buyers remain in a tentative mood, with the number and value of mortgage approvals in September below the average for the previous six months between January and June before the refendum. House purchase approvals are also lower when compared to September 2015, indicating that the uncertain outlook and continuing squeeze on affordability may have forced some home buyers to put their purchasing plans on hold.
“In contrast to the overall market, remortgaging activity has remained relatively stable, with little change in the number of remortgage approvals year-on-year. The overall value of remortgage approvals also experienced little change – enjoying a slight rise between August and September. Record-low mortgage rates have remained the norm since the Bank of England’s cut to the base interest rate, and homeowners have taken advantage of this, with our research showing 85% of remortgagors lowering their mortgage rates in September. Rising inflation will encourage more homeowners to take advantage of low rates by remortgaging to make monthly savings as the cost of everyday essentials increase.
“In spite of the dip in mortgage and house purchase approvals, demand continues to outweigh supply and the remortgage market remains very much on track as we approach the final months of 2016.”