Mortgage approvals in the UK dropped significantly in May, confirming observations by estate agents of a pre-election slowdown in the market.
Mortgage Figures Confirm Pre-Election Slowdown in Market
In May, 64,434 mortgages were granted by Britain’s major lenders, down from 67,580 in April, revealed data from the Bank of England (BoE).
Most analysts were expecting a small increase, however, the figures reflect evidence from within the industry of less activity and price rises in the pre-election period.
As inflation is low, mortgage rates are close to record lows, wages are beginning to grow and consumer confidence is high, economists are forecasting a stronger housing market over the summer.
Chief UK Economist at Deutsche Bank, George Buckley, says he expects “approvals to continue on an upwards trajectory.”1
Consumer credit was also slightly weaker than expected, up by £1 billion in May, down from £1.1 billion in April.
Senior UK Economist at Capital Economics, Samuel Tombs, believes the May figures are a “lull” with demand picking up.
He adds that although the Mortgage Market Review (MMR) and the Financial Policy Committee’s restrictions on high loan-to-income lending will “prevent a major increase in supply of secured credit, we still think that credit flows will continue to recover in the second half of this year.”1
In the latest survey by the Royal Institution of Chartered Surveyors (RICS), members revealed that although buyer interest is stronger, there is a huge undersupply of homes, with the stock of properties per surveyor at a record low since records began in 1978.
Chief Economist at RICS, Simon Rubinsohn, says that due to the shortage, “it is hardly surprising that prices across much of the country are continuing to be squeezed higher with property set to become ever more unaffordable.”1