Editor's Pick

Mortgage borrowing falls as cost of living crisis starts to bite

Christina Hoghton
Written By:
Christina Hoghton

The housing market has defied the wider economy over the last two years, but is it finally beginning to cool?

Mortgage borrowing in June fell to £5.3bn, down from £8bn in May, according to the Bank of England.

The Bank noted that, despite the notable dip, this was above the pre-pandemic average of £4.3bn in the 12 months up to February 2020.

Gross mortgage lending also fell, to £25.4 billion in June from £28.1 billion in May, and gross repayments fell slightly to £20.3 billion from £21.2 billion.

Start of a slowdown?

Approvals for house purchases, which the Bank said is a good indicator of future borrowing, decreased to 63,700 in June, from 65,700 in May.

The is below the 12-month pre-pandemic average up to February 2020 of 66,700, which could suggest the start of a slowdown.

Remortgage approvals fell too from 47,200 in May to 44,000 in June.

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “The so-called race for space fuelled the mortgage market during the pandemic but there are signs it is starting to cool. Net mortgage borrowing plunged from £8bn in May to 5.3bn in June. This is still well above the pre-pandemic 12-month average but a clear sign of the direction the market is headed.

“It adds to the growing body of data pointing towards a slowdown in the coming months as homes that were once snapped up take longer to sell and sellers become more likely to tweak asking prices.”

Andrew Montlake, managing director of broker Coreco, added: “June was still fairly busy on the mortgage front but we may be seeing the beginning of nerves in the mortgage approvals data as the cost of living crisis takes grip. Where we are seeing a lot of activity is in remortgages. People are fixing for as long as they can to help mitigate the impact of soaring inflation. All people read about is rates heading north and that is driving them to act and act now. It’s a trend we expect to continue in the months ahead.”