Have Mortgage Approvals Bounced Back Following Brexit?

Have Mortgage Approvals Bounced Back Following Brexit?

Clock  3 minute read

Carl Shave Carl Shave | November 28, 2016


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Regardless of your political opinions on the rights or wrongs of Brexit, there’s no denying that the UK’s momentous vote to leave the EU has had an impact on many aspects of Britain’s economy since the referendum on 23 June 2016 – and the housing and mortgage markets have been no exception. Pre-referendum warnings of the impact of a Brexit vote on UK housing ranged from George Osborne’s predictions that house prices would tumble and mortgage interest rates would skyrocket, to an arguably more realistic caution that certain local property markets – most notably in parts of London – are already in a house-price bubble and may be subject to a sharp “price correction”.

What We’ve Seen So Far

So far (and with the obvious caveat that, despite the referendum result, we still haven’t actually left the EU) the actual impact on the housing market has been noticeable, but somewhat less extreme than predicted. Immediately following the referendum, RICS (the Royal Institution of Chartered Surveyors) forecast a fall in house sales, and reported that its members were more pessimistic about market prospects than at any time since the 1990s. On this occasion RICS certainly weren’t far off the mark: uncertainty amongst both homeowners considering selling, and those looking to buy property, saw a fall in the total number of homes for sale in July and August compared to previous months – this despite the Bank of England slashing the base rate to an all-time low of 0.25% at the beginning of August, and many lenders adjusting their mortgage interest rates in response.

Is the Housing Market Stablising?

However, more recent figures seem to suggest that the housing market may be returning to a more stable position. In September the total number of mortgage approvals increased to 118,470 – a three-month high and an increase of almost 5,000 over the previous month. The figure included 62,932 house purchase loans (up from 60,984 in August) – with an overall value of £11.1 billion – and a total of 42,440 remortgages, which was higher than the previous six months’ average. According to the Bank of England figures, mortgage lending rates in September remained below those at the beginning of the year – although there is a reasonable argument that mortgage approvals in the first quarter of 2016 were artificially inflated by homebuyers looking to complete before changes in stamp duty rules were introduced in April.

Things Look Strong Moving into 2017

The most recent borrowing figures reveal that the volume and value of mortgage approvals continued to increase in October, with both house purchase and remortgage levels rising, contributing to the fastest-paced house-price increases since April. However, while all the evidence points to the housing and mortgage markets having bounced back since the initial impact of the referendum result, some analysts still believe that more difficult challenges are likely to come in 2017, as rising inflation seems set to squeeze many household budgets.