Home loans beat turmoil to hit highest since crisis

Mortgage lending has best month in 12 years, with banks approving 67,300 new loans, says the BOE

Tim Wallace

Michael O’dwyer

MORTGAGE lending has reached its highest level since the eve of the financial crisis, even as the housing market braces for more political turmoil and a potential no-deal Brexit in less than nine weeks.

More than £13bn of loans were offered by banks and building societies to movers last month, the biggest total since September 2007, according to figures from the Bank of England.

Lenders approved 67,300 new mortgages, the most in two years, and an increase of 3.3pc on July last year and up 1.2pc on June.

There were further flickers of life in the housing market as prices held on to gains made this summer, according to data from Nationwide.

Average house prices held flat in August compared with July, but were up by 0.6pc on the year. The average property sold in July cost £216,096, the country’s biggest building society added.

However, economists suspect political turmoil around Brexit may cause some would-be buyers to hold off in the coming months.

“With the risk of a no-deal Brexit rising, we think the mid-year recovery in lending will be cut short,” said Hansen Lu at Capital Economics.

He predicted transactions this year would fall by 1pc if the UK struck a deal to leave the EU. However mortgage approvals could slump by as much as 10pc in a no-deal scenario. “That would reflect buyers retreating from the market, for fear of a house price collapse,” he added.

The annual increase was the biggest since May but remained stubbornly below 1pc for the ninth consecutive month.

House prices almost stagnated at the start of the year and growth has continued to trail inflation in the wider economy, which is running at 2.1pc.

Experts warned that the subdued housing market remained susceptible to movements in the wider economy in addition to Brexit uncertainty.

“In the near term, healthy labour market conditions and low borrowing costs will provide underlying support, though uncertainty is likely to continue to exert a drag on sentiment and activity,” said Robert Gardner, Nationwide’s chief economist.

Howard Archer at the EY Item Club said that he expected the Nationwide figures to show an average house price increase of 1pc for the whole of 2019.

“With the economy struggling and the outlook currently highly uncertain, we suspect that house prices will remain soft despite the recent pick-up in housing market activity – which could well prove temporary,” he said.

Meanwhile consumer credit grew by 5.5pc on the year, the Bank of England said, maintaining the rate seen in June. This is the slowest growth since 2014, as the surge in borrowing that peaked in 2016 and 2017 continues to fade.

Within that category of consumer lending, credit card borrowing rose by 5.3pc, a slight acceleration but still slow by the standards of the past three years.

Other loans, such as bank lending to consumers, grew by 5.6pc, matching the slower trend.

Individuals’ total debts, including mortgages and personal loans, now amount to £1.65 trillion, a rise of 3.5pc year-on-year.

Lending to British businesses also saw the biggest decline in almost two years in July, the figures revealed.

Net lending to firms slid by £4.2bn over the month, driven by a £2bn net repayment by businesses to banks.