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Market defies Brexit jitters as borrowing rates fall to record low

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Fears raised over the UK housing market in the wake of the Brexit vote have so far proved to be ‘wide of the mark’ according to various experts, with the sector showing signs of a post-Brexit surge, illustrated by a sharp rise in mortgage lending, as lenders offer record low rates on deals in an effort to bring in new business. 

The latest Mortgage Monitor from e.surv shows that the number of mortgage approvals grew by 5% between July and August to reach 63,972, and although this figure is down 10.3% year-on-year, it does suggest that the market is swiftly recovering from the post-referendum lull as confidence improves and mortgage borrowing rates fall, thanks partly to the Bank of England’s (BoE) decision to lower the base rate to 0.25%. 

In the run-up to and immediate aftermath of the EU referendum there was an understandable drop-off in buyer enquiries amid greater uncertainty in the market, with various economists pessimistically warning of a fall in house prices. But more than 100 days on from the EU vote and those fears have not materialised, with growing signs that buyers are returning to the market. 

“Despite the number of approvals being lower than a year ago, positive signs are already emerging in this post-referendum mortgage market,” said Richard Sexton, director of e.surv chartered surveyors. 

“The policy announcements made in the aftermath of the vote look to have calmed the nerves of borrowers and lenders alike,” he added.

The Council of Mortgage Lenders (CML) reported its strongest August since 2007 – with an estimated £22.5bn worth of home loans handed out, up 7% from July and 15% higher than August last year.

Increased Availability

The number of mortgage products on the market has surged by 85% over the past two years with a total of 7,481 mainstream lender products, excluding direct and exclusives, now listed on Mortgage Brain’s latest sourcing systems – up from 4,031 in September 2014 and 5,019 this time last year.

The buy-to-let market has seen the biggest hike in product availability with 637 new products coming on stream over the past 12 months taking the total in the sector to 1,853, up 52% year-on-year. 

There has also been a notable rise in the number of high loan-to-value (LTV) products over the past 12 months, with Mortgage Brain’s research showing that mortgage advisers now have access to 296 90% loan-to-value (LTV) products and 1,641 80% LTV products – an annual increase of 47% and 45% respectively. 

First-time buyers 

The number of prospective first-time buyers planning to acquire property remains broadly stable despite uncertainty following the EU referendum, research from Aldermore shows.

Its first-time buyer index, which was conducted both before and after the EU vote, found similar levels of confidence among those looking to acquire their first property over the next 12 months.

The research suggests around a million people are planning to buy their first home in the coming year, and while raising a deposit and high property prices remain major issues, only 5% of respondents listed mortgage affordability as their main obstacle, while just 7% citied difficulties securing a mortgage.

Looking Ahead

With more lenders passing on the recent cut in interest rates to borrowers and consumer confidence continuing to grow, it is likely that BoE will see some improvement in its mortgage lending figures as we head into the busy autumn period, especially if the Bank opts to cut interest rates further. 

Economists predict that the BoE is likely to announce a further cut to the base rate in November, bringing it down from 0.25% to just 0.1%.

Either way, with finance being so cost-effective at the moment, there are plenty of opportunities to be taken advantage of; whether you are interested in taking out new home loans or remortgaging your existing properties. 

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