UK gross mortgage lending falls in Brexit aftermath, CML data shows

Gross mortgage lending in the UK fell in July as house purchase activity slowed in the aftermath of Britain’s vote to leave the European Union, data showed on Thursday.

The Council of Mortgage Lenders (CML) said gross mortgage lending dropped 0.9% year-on-year and 0.1% month-on-month in July to £21.4bn compared to £21.5bn in June.

“The subdued nature of property transactions and mortgage lending in July are consistent with a less positive backdrop for house purchase activity post-referendum,” said CML chief economist Bob Pannell.

“The Bank of England expects stronger economic headwinds to build as we move into 2017, and the Monetary Policy Committee’s package of monetary policy measures represents a spirited effort to lean against these on a timely basis.”

Pannell said the Bank’s Term Funding Scheme should boost market sentiment slightly by engineering broader cuts to rates for existing mortgage borrowers. However, it is unclear how well the Bank’s actions will underpin borrower demand in a more adverse economic climate, he said.

Howard Archer, chief UK and European economist at IHS Global Insight, said housing market activity has slowed after being buoyed in the first quarter by buy-to-let and second home purchasers rushing to beat the increase in stamp duty on 1 April. Brexit uncertainty has also weighed on the sector, he said.

“We suspect that house prices could ease back by around 3% over the latter months of 2016 and there could well be a further 5% drop in 2017,” Archer added.

“This suspicion is fuelled by the BBA reporting that mortgage approvals slowed to an 18-month low in July and by the latest CML data.

“We believe housing market activity is likely to be limited over the coming months and prices will weaken as heightened uncertainty following the UK’s vote to leave the EU weighs down on consumer confidence and willingness to engage in major transactions, and also hampers economic activity.”