Mortgage lending may have reached a plateau, an industry expert has warned – at half of its peak pre-credit crunch.
David Copland, director of mortgages at property group LSL, was speaking after the Bank of England announced an unexpected drop in mortgage approvals for last month.
There were 57,667 house purchase approvals in June, down from 58,071 in May, and short of Reuters’ forecast of 59,500.
The overall figure of 102,278 home loan approvals includes a drop in remortgaging approvals from 32,209 to 31,486
The Bank of England’s data contrasts with that of the British Bankers’ Association which last week reported a rise in mortgage approvals by high street banks in June to their highest level since January 2012. It also contrasts with claims by mutuals that lending by building societies was up by 28% in the first half of this year compared with the same period last year. The Building Societies Association says it is banks that have been lending less.
According to the Bank of England, mortgage approvals in May were at their highest for three and a half years. June’s figures are still at the second highest level since 2009. They are also up 21.5% year-on-year, and are around 7,500 higher than in April this year.
However, the fact that approvals went down last month and not up, as expected, has prompted some concern.
Copland said: “The figures released by the Bank of England reflect a market that may have reached something of a plateau for this year.
“Over the past few months there has been speculation about interest rates and what may happen when the new governor of the Bank of England took the reins. However, recent comment from Mark Carney regarding interest rates, confirmed the Bank’s reluctance to increase interest rates for the foreseeable future.
“With interest rates staying low, I see a continuation in the current situation regarding new mortgage lending, but can’t see a marked difference in remortgaging over the second half of the year.”
Dr Howard Archer, chief UK economist at IHS Global Insight, said the fall in approvals was a surprise – but no more than that.
He said: “June’s small dip followed a particularly marked increase in May, and it is notable that mortgage approvals in June were still at their second highest level since December 2009 and were up by 21.5% year-on-year.
“As such, the small dip in mortgage approvals in June does not fundamentally change the view that housing market activity has stepped up a gear overall recently.”
Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), said: "Although the market is showing signs of progress, the number of mortgage approvals is still less than half of its peak ten years ago.
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