Following the EU referendum, the Council of Mortgage Lenders (CML) issued their market commentary, estimating that gross mortgage lending reached £20.7 billion in June. This is 16% higher than May’s lending total of £17.8 billion, and 3% higher than the £20.1 billion lent in June last year. This is the highest June figure in eight years when gross lending reached £22.6 billion in 2008.
It is expected that the result of the EU referendum will have an impact on the housing market, however, the extent is yet unknown. The general view is that uncertainty will create a wait-and-see attitude and dampen housing price growth. You can read Henry Knight’s view here.
Not surprisingly, it is expected that lending over the coming months will be dominated by remortgage activity as opposed to house purchases.
The new Prime Minister, Theresa May, will be tasked with triggering Article 50 of the Lisbon Treaty, although she has stated that it will not be this year. The Prime Minister has already appointed new members of her cabinet, built to deliver her vision of leadership for the UK.
Despite speculation, the Bank of England has held interest rates at 0.5%.
The Bank of England has said: “Most members of the committee expect monetary policy to be loosened in August. The precise size and nature of any stimulatory measures will be determined during the August forecast and Inflation Report round.”
According to CML, “Economic growth in the first quarter of 2016 was unrevised at 0.4%, according to the Office for National Statistics’ second estimate. Survey data indicates that this subdued rate of growth is set to continue into the second quarter of 2016, partly as businesses postponed investment decisions until after the vote.
“Forecasters had already revised down growth expectations for the UK economy to around 2% for 2016, but even this figure is likely to be revised down further as the period of economic uncertainty extends.”
The inflation rate remained at 0.3% for the second month in a row in May, driven by a fall in the price of clothing and food, but is expected to rise in the second half of the year.
Lending figures are still distorted by the stamp duty change on second properties, this together with the uncertainty caused by the EU referendum, may show a lengthened downside to transactions as opposed to a dramatic one.
CML added: “And while this uncertainty will linger for some time, house prices remain underpinned by sound fundamentals.
“…the characteristics of the UK housing market are unlikely to change dramatically in the near term, as there will continue to be a mismatch of supply and demand, stretched affordability and a relatively low number of home movers.”
Henry Knight, Director, Springtide Capital commented: “We won’t be able to see the full extent of the impact of the EU referendum result for some months. Those who were in the middle of buying or selling a property would have no doubt continued progressing their sale or purchase following the referendum. Properties continue to go on the market and there is a strong demand for them – who knows, it may even result in people wishing to sell their property prior to any exit from the EU.
“Dampening housing price growth against what was an unsustainable rate of increase will help first-time buyers to afford properties. I’m sure that the housing market has challenging times ahead, but this may not be felt as soon as people may have thought. For Springtide Capital, it is very much business as usual.”
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