The end of August saw the final tally of mortgage approvals for July released. This was an important moment, as it would reveal how much impact the vote for Brexit would have on the housing market.
As it turned out, the drop in approvals was rather more marked than might have been assumed. May saw 64,152 mortgages approved in total, whereas July saw a much lower total figure of 60,912 recorded. Economists had forecast a drop, but they estimated the number would be around the 61,900 mark. As it turned out, they were off by quite some distance.
A lower number of mortgages approved for house purchases too
If we look at just those mortgages that were approved in order for people to buy property, we can see the figure in June was 39,763. In contrast, July’s figure was significantly lower at 37,662.
But while that drop is quite noticeable, it’s not as marked as the drop recorded between this July and July 2015. According to the British Bankers’ Association, July 2016’s mortgage rate in this area is 19% lower than it was at the same time last year.
Holding off on big purchases
It seems to be indicative of the fact that big purchases – and there is none bigger than a property – are being put off for the time being. People want to see what happens after Brexit, and how the economy will progress from here. There may be some uncertainty over jobs and security, and these elements will certainly lead some people to put off making big decisions about moving home. The same applies to those who are looking to buy for the first time.
Short-term borrowing seems to be holding up well, which gives further credence to this idea. However, it remains to be seen whether people continue to spend on day-to-day things and postpone home-buying for another time.
In real terms, we are still only a couple of months further down the line from the referendum vote. The outcome of leaving the European Union is still to be dealt with. Until such time as a clearer deal or arrangement becomes clear, some people may still refrain from moving or investing in their first property.
Will house prices fall?
It is possible that house prices may suffer if fewer people are looking to buy property in the immediate months ahead. However, house prices can be calculated based on a variety of factors, so this is by no means a certainty.
The reduction in the base rate has led to some better deals in the mortgage market, although not all lenders have passed on the drop in the base rate. Other elements that have made a difference this year have included the changes to the buy-to-let market and the changes to stamp duty rates.
All of this has combined to create a lot of uncertainty around buying and selling properties of all kinds. Perhaps once things settle down towards the end of the year, we may be looking at a steadier market once again. Only time will tell.