Statistics showing that consumer lending rose by the highest year-on-year rate in over a decade in June, yet mortgage approval rates dropped to their lowest level in over a year in the same month, are the latest indication of the confused and disparate current state of British economics, leading many to wonder what is really going on in the aftermath of the EU referendum vote.
From May to June this year, the number of mortgage approvals dropped by almost 2,000 (66,722 to 64,766), yet banks were seemingly more willing to stump up the cash for consumers. With lending 10.3% higher this June than last, such year-on-year growth has not been seen since late 2005.
Why, then, are banks seemingly willing more to lend while mortgage companies move the other way and exercise greater caution?
One possible explanation is that more Britons, fearing for their short-term economic future in the wake of Brexit, are looking to borrow. Banks, despite some of them blaming the referendum result for the need to close branches, have been broadly receptive to these applications, although the Bank of England expects year-on-year figures to slow down as 2016 continues.
Meanwhile, mortgage lenders, perhaps fearful of the unknown as the UK moves to cut ties with the EU, are more hesitant to lend to buyers, perhaps monitoring the source of their cash (such as that needed for a deposit) and feeling concern that it has been generated unsustainably, such as through a loan that will need to be repaid in tandem with any mortgage approved.
Brexit has certainly brought the realities of how economics affects house buying to a wide audience, with headlines such as “lowest in X years” and “highest in Y years” appearing to crop up regularly in newspapers in the last few weeks. It is to be hoped, and expected, that the immediate reaction of banks, lenders and borrowers will be quelled as dust settles on the decision and the UK reestablishes some degree of normality.
