Mortgage Lenders Have Strong Figures For June, But Market Still Bearish

Mortgage lenders have posted their strongest figures in eight years for the month of June. However, lenders also warn the housing marketing is on the verge of softening.

According to the Council of Mortgage Lenders, about £20.7 billion of mortgages were provided last month, a 16 percent increase from the £17.8 billion in May. It was also three percent higher than the £20.1 billion for June 2015.

The CML, a representative for banks and building societies, said the latest data on lending totals was the most ever for June since 2008 when it reached £22.6 billion.

The estimated mortgage value for the 2016 second quarter was £56.1 billion – 10 percent less than the first half of the year but eight percent higher than the second quarter 2015.

With low-interest rates, there have been a number of mortgage price wars, which means homeowners have had an array of inexpensive deals they could pick from.

These figures from the CML were made public as the Yorkshire Building Society revealed a 10-year fixed rate mortgage. The company claimed the new 10-year fixed rate was due to the strong customer demand for longer-term deals after Britain voted to leave the European Union. The deal includes a 2.89 percent interest rate for persons who put at least 25 percent down.

Moneyfacts, a financial data website, said this would be the lowest percentage rate on the market for this type of deal for borrowers who put that amount of deposit down.

The Bank of England kept its base rate at 0.4 percent in July but said a rate cut could come in August, which means borrowers’ cost could get even lower.

Mohammad Jamei, senior economist at CML, said the EU’s referendum would likely affect the housing sector but that there is a plethora amount of uncertainty still. He said while mortgage firms have an excessive amount of lending capacity, levels of activity will take the most hit for any market adjustment in the next six or more months. Buyers and sellers are likely to wait until they get a clearer idea of where the market is going.

Along with the EU referendum, disruption with the housing market is also due to the stamp duty hike for the buy-to-let investors. On April 1, an increase occurred, which led to a rapid buying of properties from investors. Sales may have clustered together earlier in the year while some sales took place later on.

Jamei said the starting position for the UK housing market is rather promising with transactions increasing by nearly 80 percent from the lows just after the crisis. He said, in the next six months, activity will likely soften. Lending is likely to occur with re-mortgages than with home purchases.

The Bank of England’s Monetary Policy Committee will meet on Aug. 4, which may cause some monetary easing to occur especially after what happened after the Brexit vote.

 

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