Mortgage lending increased in June despite rising rates for homeowners, the Bank of England has reported. Net borrowing of mortgage debt surged to £7.7 billion, up from £3.3 billion in May, while mortgage approvals for home purchases rose to 58,200 from 56,600.
Rate Environment Remains Elevated
The uptick came against a backdrop of steadily increasing mortgage rates, driven by ongoing Middle East conflict raising inflation concerns. According to Moneyfacts, the average two-year fixed residential mortgage stood at 5.62% on Wednesday, with a five-year fix at 5.66%.
Signs of Stability?
Experts suggested the modest rise could indicate economic stability following recent Bank of England decisions to hold interest rates at 3.75%. Nathan Emerson, chief executive at Propertymark, said: “The increase in net mortgage approvals for house purchases in June suggests that buyers responded positively to a period of relative economic stability.” He added that approvals remained below the six-month average, indicating activity has yet to fully recover.
Consumer Credit Also Rises
The Bank’s data showed net borrowing of consumer credit increased to £1.8 billion from £1.7 billion in May, driven by credit card lending which rose to £0.9 billion from £0.6 billion. Other forms of consumer credit, such as car loans and personal loans, decreased.
Gareth Lewis, deputy chief executive of specialist lender MT Finance, said: “There urgently needs to be some stimulus for the housing market, with the new Prime Minister required to do something to encourage transactions and activity, which will also benefit the wider economy.” He noted volatile funding rates as the real issue, with the Middle East conflict changing the outlook for lower interest rates.
