The Bank of England’s latest Money and Credit release has revealed a slowdown in mortgage borrowing and consumer credit in February as household borrowing cools and economic conditions shift.
Net mortgage borrowing by individuals fell to £3.3 billion in February, a decline of £0.9 billion from the previous month.
This follows an increase of £0.8 billion in January, suggesting that recent gains in mortgage activity may have been short-lived.
Mortgage approvals for house purchases also dipped slightly, down by 600 to 65,500, while approvals for remortgaging fell by 800 to 32,000.
DOWNTURN
Consumer credit borrowing also saw a downturn, with net borrowing dropping to £1.4 billion in February from £1.7 billion in January. Within this category, credit card borrowing declined to £0.8 billion from £1.1 billion, indicating more cautious spending patterns among consumers.
But while borrowing remains relatively strong there are signs of a slowdown – particularly in mortgage lending and consumer credit.
UNSPECTACULAR
Simon Gammon, Managing Partner, Knight Frank Finance, says: “Mortgage market activity was solid but unspectacular through February, remaining broadly in-line with the 2019, pre-pandemic monthly average.
“The market is currently dominated by people who need to move, often those who put off big decisions during the volatility of last year.
“As a result, affluent suburban areas of cities like London are increasingly competitive. We’ve seen a sharp increase in homeowners taking bridging finance to purchase homes before they have found their own buyer, for example.
“There is still a huge amount of competition among lenders. Where they can’t move on rates, we’ve seeing lots of changes to lending criteria in an attempt to broaden their scope of borrowing and build market share.”
CAUTIOUS
Nathan Emerson, Chief Execuitve of Propertymark, adds: “With the wider global economy seeing upheaval, many people remain cautious about how this might affect aspects such as the rate of inflation and base rates domestically.
“Although overall, we are seeing an encouraging level of growth year on year within the housing market, it is vital consumers feel confident enough to approach a potential house move when looking at their affordability.
“We have seen a strong start to the year overall, and as we head further towards the summer months, we remain optimistic to see further market momentum.
“It does, however, remain imperative that the rate of inflation remains closely aligned with the initially set target of 2% before the Bank of England will likely consider any new base rate cuts.”
AFFORDABILITY
Jason Tebb, President of OnTheMarket, says: “With approvals for house purchases, an indicator of future borrowing, dipping slightly again in February after a modest fall in January, market stability and buyer confidence continues to be steady.
“As the rate on newly-drawn mortgages rose again in February, along with the rate on outstanding mortgage stock, affordability remains a concern for borrowers.
“Two rate reductions in the second half of last year, followed by one so far this year is helping but mortgage rates are still higher than many have grown used to in recent years.
“Further reductions from the Bank of England would provide a welcome shot in the arm for the market, particularly with the stamp duty concession ending today.”
INTERESTING
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “The latest net borrowing of mortgage debt numbers are more interesting than usual as January’s increase was more than reversed by February’s decline, graphically illustrating the loss of buyers’ additional stamp duty concession.
“However, on the ground we are not seeing any significant correction but a determination of many to press ahead with moves, many of which were previously brought forward. Fewer sales and more protracted negotiations are resulting but plenty of stock means prices are softening a little.”
