Housing market feels chill of tax rises and EU exit

BRITAIN’S housing market is still under pressure from April’s tax hikes on buy-to-let properties and June’s vote to leave the EU, with the number of home purchases last month firmly below the levels of last summer.

Mortgage lending is rising, but much of the increase comes from existing homeowners taking out new loans to benefit from low interest rates, rather than new purchases.

A total of 48,973 homes were bought in June, according to the British Bankers’ Association (BBA), the highest number since October, but that is still down 10pc on the 54,454 sold in June 2015. Buyers borrowed £8.4bn to buy those homes – an annual increase of 3.5pc – which suggests houses are more expensive, although fewer are being sold.

“The sharp decline in surveys of house price expectations and profit warnings from estate agents since the vote signals that mortgage demand has fallen further in recent weeks,” said Samuel Tombs, from Pantheon Economics. “Meanwhile, little scope re- mains for mortgage rates to decline further and so revive demand. Although the Bank of England’s Monetary Policy Committee likely will cut interest rates next week, probably to 0.25pc from 0.50pc currently, banks likely will increase lending spreads to account for the higher risk of borrower default, due to the much weaker economic outlook.”

Business borrowing also took a knock in June, with the overall stock of loans to non-financial companies dipping £526m, its first fall this year.

Virgin Money’s pre-tax profits jumped 70pc in the first half to £93.7m as its cheap credit card deals attracted £1bn of new lending. Credit cards now account for more than one third of Virgin Money’s earnings. Mortgage lending rose 44pc to £3.6bn.

First-half profits at Provident Financial rose nearly 50pc to £165.4m. The lender’s chief executive, Peter Crook, said its customers were typically not homeowners, with “no obvious lack of confidence” after the EU result. “I expect most of them probably voted to leave, so they’re perfectly happy,” he added.