Britain’s housing market is still under pressure from April’s tax hikes and June’s vote to leave the EU, with the number of home purchases last month firmly below levels seen last summer.
Mortgage lending is rising, but much of the increase comes from existing home owners taking out new loans to benefit from low interest rates, rather than new purchases.
A total of 48,973 homes were bought in June, according to the British Bankers’ Association (BBA), the highest number since October, but that is still down 10pc on the 54,454 sold in June 2015.
Buyers borrowed £8.4bn to buy those homes – an annual increase of 3.5pc - which suggests houses are more expensive, although fewer are being sold.
One key impact on the market came from April’s tax hikes for landlords. Lending increased sharply in February and March as buy-to-let investors scrambled to buy homes before stamp duty increased in April. After the tax changes came into effect, lending declined sharply.
The EU referendum has also affected the property market. Uncertainty over the economic impact of the Brexit vote has left some potential buyers cautious on spending large sums of money.
“The sharp decline in surveys of house price expectations and profit warnings from estate agents since the vote signals that mortgage demand has fallen further in recent weeks,” said Samuel Tombs from Pantheon Economics.
“Meanwhile, little scope remains for mortgage rates to decline further and so revive demand. Although the Bank of England’s Monetary Policy Committee likely will cut interest rates next week, probably to 0.25pc from 0.50pc currently, banks likely will increase lending spreads to account for the higher risk of borrower default, due to the much weaker economic outlook.”
Business borrowing also took a knock in June, with the overall stock of loans to non-financial companies dipping by £526m.
That is the first monthly fall of this year and compares with average growth of £393m over the previous six months.
“Overall, business confidence was clearly fragile in anticipation of the outcome of the vote, but these results are not a verdict on the health of the economy post-Brexit,” said the BBA’s chief economist Rebecca Harding.
“We won’t start to see that data come through until the autumn and any trends before then should not be over-interpreted.”
There is also the possibility that overseas buyers might begin to snap up more British property to take advantage of a weaker pound, which has made homes relatively cheaper for foreign investors.