Mortgage approvals show ‘surprising strength’ despite Brexit uncertainty

The extended Brexit deadline appears to have given housing market activity a boost, economists have suggested.

Mortgage approval figures showed “surprising strength” in May, despite ongoing political uncertainty, they said.

Some 42,384 mortgage approvals were made to home buyers in May, according to UK Finance.

This was just slightly down on 42,898 in April which had been the highest monthly total since February 2017.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The modest decline in mortgage approvals in May does little to change the record of surprising strength in the face of elevated economic and political uncertainty.”

He continued: “Looking ahead, with households’ real incomes set to continue to rise at a solid rate, thanks to the tight labour market and low inflation, and mortgage rates set to fall in response to the recent decline in banks’ wholesale funding costs, mortgage lending should remain on a slowly rising path in the second half of this year.”

Howard Archer, chief economic adviser at EY ITEM Club, said May’s figures suggest “housing market activity may well have got at least some temporary support from the avoidance of a disruptive Brexit at the end of March”.

But he said prolonged uncertainty could hold back the housing market in the coming months.

He continued: “We believe with Brexit being delayed until October 31 – and it is currently very unclear what will happen then – and the domestic UK political situation unsettled, prolonged uncertainty will weigh down on the economy and hamper the housing market.

“Consumers may well be particularly cautious about committing to buying a house, especially as house prices are relatively expensive relative to incomes.”

Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors (Rics), said: “While not too much store should be set by one month’s figures, they do reflect what we are seeing on the ground – more buyer activity even though some sellers are still reluctant to recognise the new realities of a softening market.

“Looking forward, it remains to be seen how many of these approvals turn into completions but the fact that they are approaching the seasonal norm must be encouraging news.”

UK Finance’s report also said that credit card repayments have remained in line with credit card spending “showing that consumers are managing their finances effectively overall”.

Annual growth in consumer credit, which includes lending on credit cards, personal loans and overdrafts, stood at 4.1% in May, up from 3.8% in April.

Deposits held in instant access accounts were 3% higher than in the same month a year earlier.

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