Homebuyers and lenders appear to have brushed Brexit uncertainty in March, as mortgage approvals reached their highest level since June of last year.
Industry data from UK Finance, a lobby group for the financial services industry, revealed that high street banks approved 39,980 mortgages in March, up 6% from a year ago and up 2% from February. That’s the highest number of mortgages approved in a single month since June 2018.
The numbers were greeted as a sign that the housing market is rebounding following a slowdown in 2018 as Brexit negotiations stalled.
The figures confirmed the optimistic prognosis from the Royal Institute of Chartered Surveyors (Rics), which found that house prices had risen last month for the first time since July 2018. However, Rics warned that worries about Brexit would continue to put a damper on price growth.
Jeremy Leaf, north London estate agent and a former Rics residential chairman, told the Financial Times: “Mortgage approvals for home purchase are always a useful lead indicator of future market activity and these are no exception.
“They confirm what we have been seeing on the ground and in other surveys — that transactions are holding up reasonably well despite political and economic distraction,” he added.
However, he noted that sales are taking longer to complete and that buyers and sellers are having a hard time finding middle grounds on prices. He attributed some of the market turbulence to the withdrawal of buy-to-let investors from the market, following the introduction of a stamp duty surcharge on second homes and cuts to the mortgage interest tax relief. Those buyers haven’t yet been replaced by fist-time buyers.
The market varied regionally as well, he noted.
“The picture is very patchy and can vary considerably between areas which are quite close together and between London and elsewhere.”
The United Kingdom was due to leave the European Union on 29 March, but was granted an extension until 31 October, after Prime Minister Theresa May failed to gain parliamentary approval for her withdrawal agreement.
With the new deadline looming, other analysts cautioned that the recovery in the housing market would be limited.
Capital Economics property economist Hansen Lu said: “Looking ahead, the delay to Brexit suggest that demand and sentiment in the housing market will stay subdued for at least the next few months. As a result, we don’t expect to see a further recovery in mortgage approvals this year. At the same time, a no-deal Brexit looks less likely than before.”
However, recovery in the housing market was matched by and related to other good economic indicators.
While consumers were still wary of big-ticket purchases, “it may well be that housing market activity has gained some support from recent improved consumer purchasing power and robust employment growth,” Howard Archer, from economic forecasting group EY ITEM, fold the Evening Standard.
Annual wage growth is at nearly a 10-year high and unemployment has fallen to 3.9%, a 44-year low.
Soruce: Money Expert