The data from the Council of Mortgage Lenders (CML) is the first full month since the country voted to leave the European Union and it is too soon to see how much of an impact Brexit is having.
CML chief economist Bob Pannell explained that the subdued nature of property transactions and mortgage lending in July are consistent with a less positive backdrop for house purchase activity post-referendum.
‘The Bank of England expects stronger economic headwinds to build as we move into 2017, and the Monetary Policy Committee’s package of monetary policy measures represents a spirited effort to lean against these on a timely basis. The MPC has pencilled in a further cut in Bank Rate later this year, but aims to avoid negative interest rate territory,’ he said.
‘The Term Funding Scheme should boost market sentiment a little, by engineering broader cuts to rates for existing mortgage borrowers than would have been the case, but it is not clear how well the Bank’s actions will underpin borrower demand in a more adverse economic climate,’ he added.
Steve Bolton, founder of Platinum Property Partners, pointed out that the buy to let market was particularly impacted and purchase activity in June had almost halved compared to a year ago but the buy to let remortgage activity has picked up year on year.
‘Landlords are well positioned to benefit from falling mortgage rates as a result of the recent base rate cut. A mortgage can often be one of the greatest costs for landlords, so swapping to a more affordable deal is well worth the effort,’ he said.
‘Landlords are now operating in an uncertain political and economic environment, and further legislative changes which will phase out the ability to treat mortgage interest payments as a legitimate business cost could lead to many leaving the market or being deterred from expanding their portfolio,’ he explained.
‘This could lead to rising rents for many tenants and less affordable housing provision in the Private Rented Sector. It will therefore be interesting to see how this will have a knock-on effect on mortgage lending,’ he pointed out.
‘However, investing in property has proven to give strong returns when done effectively. It is now more important than ever that amateur landlords ensure they manage their properties professionally to build a profitable long term investment,’ he added.
According to John Goodall, chief executive officer of peer to peer platform Landbay, despite some Brexit uncertainty it is clear that the property market, and in turn the mortgage market, is built on strong foundations, so the outlook is optimistic.
‘The UK’s housing shortage will remain a pivotal political and social issue, so we should expect buyer demand and lending levels to bounce back later in the year as the dust settles. In the meantime, it’s even more critical that the UK has a reliable and accessible buy to let market for those who cannot, or choose not to, buy their own homes,’ he added.
John Eastgate, director of sales at OneSavings Bank, pointed out that fears of a significant slump in the immediate aftermath of the EU referendum have been overblown somewhat. ‘While the medium to long term economic impact of the decision is far from clear, the mortgage market would appear to be in business as usual mode,’ he said.
‘Buyers, and in particular, investors, who are in a position to enter the market are just getting on with it, rather than sitting on their hands and waiting for the political and economic uncertainty of Brexit to dissipate,’ he explained.
‘Moreover, the Bank of England’s package of monetary stimulus measures opens up the possibility of even cheaper mortgage products. This will continue to stimulate buyer demand, as well as supporting buoyant remortgage activity as borrowers look to take advantage of the incredibly low rates on offer,’ he added.
‘This activity is likely to continue, especially in the buy to let sector. With the PRA’s final paper on underwriting standards due to be published in the coming month or so, many professional investors will take the opportunity to buy or refinance before the revised rules come into effect,’ he concluded.
