BoE figures show ‘frantic’ housing market cooling

Net mortgage borrowing fell by almost £3bn in June, according to monthly Bank of England money and credit figures, which experts say show the ‘frenzied’ state of the market housing is coming to an end.

Data showed net borrowing of mortgage debt fell to £5.3bn in June, from £8bn in May.

But borrowing remains above the pre-pandemic average of £4.3bn in the 12 months to February 2020.

The figures also showed that home purchase approvals, an indicator of future borrowing, fell for a fifth straight month, falling to 63,700 in June from 65,700 in May.

This figure is lower than the pre-pandemic 12-month average to February 2020 of 66,700.

Managing director of property platform Twindig, Anthony Codling, said it showed the housing market was on course for a more normal level of activity after a “frantic” two-year period.

According to him, the normalization of this activity has been “punctuated by working from home, space races and stamp holidays”.

Tomer Aboody, director of home lender MT Finance, said the falls were unsurprising and reflected some of the heat emerging from the market.

“With improving supply levels helping to satisfy buyer demand, the pace of house price growth is also expected to slow as equilibrium returns to the market,” he said.

Aboody also said that with the prospect of higher mortgage rates, “buyers are taking advantage of the last remaining lower rates before the inevitable spike, those paying down desperate to lock themselves into a fixed-term mortgage for as long as possible.” .

Meanwhile, figures also showed remortgage approvals, which only capture remortgages with a different lender, fell to 44,000 in June from 47,200 in May.

This remains below the pre-pandemic 12-month average through February 2020 of 49,500.

The “effective” interest rate – the real interest rate paid – on newly contracted mortgages increased by 20 basis points to 2.15% in June, while the rate on outstanding mortgages rose 4 basis points to 2.11%.

Steve Seal, managing director of Bluestone Mortgages, said that with inflation hitting a 40-year high and pressure on people’s finances due to the cost of living crisis, he expected to see a number growing number of customers are turning away from the traditional mortgage market. .

“For these people, it is important to remember that hope is not lost. There are specialist lenders who can meet their needs and offer a range of solutions to help them move up or up the property ladder. Ultimately, all lenders have a responsibility to ensure customers are pointed in the right direction so they can make their dream of home ownership a reality,” he said.

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Penny D. Jackson