Mortgage borrowing up 76% to £7.4bn: BoE

Net residential mortgage borrowing increased to £7.4 billion in May, up from £4.2 billion in April to sit above its 12-month pre-pandemic average of £4.3 billion, according to the Bank of England's latest Money and Credit data.

Related topics:  Mortgages
Rozi Jones
1st July 2022
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"It would be easy to think that all the news of inflation and soaring prices would make many think twice about moving or buying, but for the time being that does not appear to be the case."

Gross lending increased to £28.4 billion in May from £26.7 billion in April, while gross repayments rose slightly to £21.8 billion in May from £21.6 billion in April.

Mortgage approvals ticked up to 66,200 in May, from 66,100 in April. This is slightly below the 12-month pre-pandemic average up to February 2020 of 66,700.

The ‘effective’ interest rate paid on newly drawn mortgages increased by 13 basis points to 1.95% in May, while the rate on the outstanding stock of mortgages ticked up 2 basis points to 2.07%.

Richard Pike, sales and marketing director at Phoebus Software, said: “Mortgage activity appears to be bucking expectations following the recent interest rate rises. It would be easy to think that all the news of inflation and soaring prices would make many think twice about moving or buying, but for the time being that does not appear to be the case. There is still plenty of demand to buy and sell but there will come a time, if the MPC continues on its path of raising interest rates to curb inflation, when worries over finances may affect confidence. For now though, with plenty of lender appetite and competitive rates, we are looking at a pretty healthy picture.”

Lisa Martin, development director at TMA Club, commented: “Today’s figures reflect a resilient mortgage market. Recent interest rate hikes and the cost-of-living crisis are likely to be influencing a more cautious approach by lenders, but approvals for house purchases rose slightly to 66,200 in May, from 66,100 in April.

“As prices are likely to continue to rise throughout the year, customers will be looking to brokers to act swiftly to secure the best deals and lock into fixed rates before mortgages are replaced or pulled from the market.”

Jeremy Leaf, north London estate agent and former RICS residential chairman, added: "Mortgage approvals are generally a good indictor of market direction and these, like the Nationwide figures yesterday, show that you write the property market off at your peril.

"What’s happening on the ground is that buyers and sellers are inevitably more cautious bearing in mind steep rises in the cost of living and interest rates with probably worse to come.

"Nevertheless, we are seeing few attempts at renegotiation or withdrawal as buyers know in particular the continuing shortage of stock means there will be little alternative. Therefore, we don’t expect to see a sharp correction in prices but they are already rising more slowly than they have been and certainly transactions are taking longer as there is less competition."

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