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Mortgage Lending Declines Amid UK Property Market Slowdown

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In a recent report from Yahoo Finance UK, we delve into the shifting dynamics of the UK mortgage and finance landscape. Mortgage purchase approvals are still lagging below the pre-pandemic 12-month average, raising questions about the state of the housing market. Here are the key takeaways:

1. Mortgage Borrowing Trends: According to data from the Bank of England (BoE), net mortgage borrowing saw a slight decline, dropping from $5.3 billion in June to $5.1 billion in July. Gross lending, on the other hand, increased to £26.1 billion in July from $28.6 billion in June, with gross repayments surpassing $20 billion.

2. Rising Interest Rates: Newly drawn mortgages are experiencing an 18-basis point increase in effective interest rates, reaching 2.33% in July—the highest level since June 2016. This upward trend in interest rates is expected to impact borrowers, especially those with existing fixed-rate deals.

3. Household Finances Under Pressure: With inflation already at 10.1% and predicted to peak at over 18% in January, due to anticipated energy bill hikes, households are facing increasing financial strain. Experts suggest more interest rate hikes may be on the horizon.

4. Mortgage Approvals: While there was a slight up tick in house purchase approvals in July, reaching 63,800 compared to June’s 63,200, these figures remain below the pre-pandemic 12-month average of 66,800.

5. Positive Mortgage Market: Despite the cost of living continuing to rise, the mortgage market has shown resilience. Emma Hollingworth, distribution director at MPowered Mortgages, noted that the mortgage sector appears unaffected by higher inflation and interest rates.

6. Impact on First-Time Buyers: Rising interest rates mean first-time buyers may need to earn over $12,000 more to afford their homes. It’s crucial for buyers to consider locking in new deals before rates rise further.

7. Remortgaging Activity: Remortgaging approvals increased in July to 48,400 from 42,000 in June, but this remains slightly below the pre-pandemic average of 49,500.

8. Credit Card Borrowing: In a separate development, credit card borrowing has grown at the fastest pace in a decade over the 12 months leading up to July, amid the largest increase in consumer borrowing since March 2019. The growth rate for all consumer credit reached 6.9% in July, the highest in years.

9. Cost of Living Challenge: The ongoing cost of living crisis has pushed annual credit card borrowing growth to levels not seen in 17 years. As inflation hits double digits and the energy price cap is set to rise, households are facing a tightening budget.

10. Uncertain Housing Market: The question remains whether UK house prices will experience a fall amidst these financial shifts.

As the financial landscape continues to evolve, it’s essential for individuals and homeowners to stay informed and make strategic decisions to navigate these challenges effectively. Stay tuned for more updates and insights on the UK mortgage and finance sector.

Will UK house prices fall?

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