Mortgage Approvals Fall in July Amid Volatility and Interest Rate Expectations

The Bank of England's latest Money and Credit report shows that mortgage approvals and lending fell in July, despite a steady annual growth rate for net mortgage lending.

According to the report, net borrowing of mortgage debt by individuals decreased to £4.3 billion in July, down from £7.7 billion in June and below the previous six-month average of £5.3 billion.

The value and volume of mortgage borrowing both fell significantly from their six-month averages, with net mortgage approvals for house purchases dropping to 56,100 in July, below a six-month average of around 60,800.

Nick Leeming, chairman of Jackson-Stops, attributed the fall to the volatility in mortgage pricing seen during July, caused by changing inflation and interest-rate expectations that affected buyers' confidence and affordability calculations.

However, Richard Pike, sales and marketing director at Phoebus Software, hoped that July's reversal would be temporary and not indicative of a wider slowdown, while Lucian Cook, head of residential research at Savills, was more cautious, stating that the increase in fixed-rate mortgage costs had prevented an improvement in activity in the market.

Remortgaging approvals remained relatively stable, rising to 34,500 in July from 34,100 in June, and the 'effective' interest rate on newly drawn mortgages increased to 4.45% in July from 4.35% in June.