Net mortgage lending to households fell to £3.1bn in May, marking the smallest increase in mortgage lending in a month since April 2017, figures published by the Bank of England (BoE) revealed.

In today’s Money and Credit – May 2019 report, the BoE highlighted that, despite the level of mortgage borrowing dropping to its lowest level in over two years, the annual growth rate remained stable at 3.2 per cent, and has been around the 3 per cent mark since the EU Referendum in late 2016.

Further to this, mortgage approvals for house purchase, an indicator of future lending, dropped slightly in the month to 65,400, though this figure remained broadly in line with the narrow range seen in previous years. Also, the number of approvals for remortgaging fell in May, declining to 46,700.

Commenting on the data, Just Mortgages and Spicerhaart operations director John Phillips said: “There is no doubt that it has been a funny old few years for the mortgage market. Brexit has obviously had – and is still having – an impact, but I don’t think it is the only factor at play.

“For many years now, borrowing costs have been very low, but wages have not been keeping pace with house prices, so while mortgages are affordable, deposits and stamp duty are not. Those who may have upsized in the past are now either remortgaging to borrow more and then extending, or just saving the money they would’ve used on stamp duty and investing it into their existing homes.”

Expanding on his point, Phillips argued that if the government wants to “get things moving again”, they need to act on the cost of moving. “People are simply not prepared to throw thousands of pounds that could be sued to invest in a bigger home on stamp duty. Back in April, the House of Lords Committee on Intergenerational Fairness and Provision recommended changes to stamp duty because, they said it is ‘seriously distorting the market’ and I think they’re right. Until something is done about the crippling cost of stamp duty, the market will continue to struggle,” he said.

However, Coreco director Andrew Montlake highlighted that the May mortgage approvals data from the BoE “doesn’t tally with the kind of activity levels we saw on the ground”, adding that “approvals rose materially in both April and May, especially outside the capital”.

“While June did see a slowdown in approvals for house purchase, April and May were very strong as people shrugged off Brexit concerns and made the decision to get on with their lives. Especially outside the capital where prices are more attractive and exposure to Brexit perceived to be less acute,” Montlake said.

The central bank found that consumer lending levels were recorded at £800m in May, broadly in line with the £900m average since July 2018. Within this, additional borrowing for other loans and advances fell on the month to £500m, and credit card lending increased to £300m.

The annual growth rate of consumer credit slowed further in May, to 5.6 per cent, reflecting the weaker lending flows seen over a majority of the past year. This was the lowest level of growth since April 2014, and well below the peak of 10.9 per cent in November 2016.

more 2 life corporate marketing director Stuart Wilson said: “Today’s figures show that credit cards and other forms of unsecured borrowing are continuing to be used by consumers to juggle their finances and meet their ongoing commitments. Our own research supports this, revealing that one group in particular is turning towards unsecured borrowing to help boost their income, with 29 per cent of over 55s saying they’ve taken on debt to help cover their day to day expenses.”

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