Net mortgage borrowing more than doubled to £7.7bn in June, up from £3.3bn in May, according to the Bank of England.
The total was also substantially above the £4.9bn average recorded during the previous six months.
Households borrowed £7.9bn across mortgages and consumer credit during the month, compared with £4.5bn in May.
The figures indicate a sharp increase in the flow of mortgage funds despite house purchase approvals remaining below their recent average.
APPROVALS RECOVER
Net mortgage approvals for house purchases increased to 58,200 in June, recovering from 56,200 in May.
However, the latest figure remained below the average of approximately 61,400 recorded over the previous six months.
Approvals for remortgaging with a different lender increased more modestly, rising from 33,800 in May to 34,200 in June.
CREDIT CARD BORROWING RISES
Net consumer credit borrowing edged up from £1.7bn to £1.8bn, matching the average recorded over the preceding six months.
Credit card borrowing rose from £600m in May to £900m in June.
Borrowing through other forms of consumer credit, including personal loans and car dealership finance, fell from £1.1bn to £900m.
HOUSEHOLDS ADD TO SAVINGS
Households deposited £2bn into individual savings accounts and £1.6bn into interest-bearing fixed-term deposits during June.
A further £400m was placed into non-interest-bearing accounts.
These increases were partially offset by £1.3bn of withdrawals from interest-bearing instant-access accounts.
Private non-financial corporations made net repayments of £2.5bn during June, following net borrowing of £1.2bn in May.
However, bank lending to those businesses increased to £4.7bn, up from £1.9bn a month earlier.
INDUSTRY REACTION
Rachel Geddes, strategic lender relationship director at Mortgage Advice Bureau, said: “Net mortgage approvals rose to 58,200 in June as demand holds up, with the market watching tomorrow’s rate decision closely. Remortgage approvals moved the same way, rising to 34,200 nationally.
“MAB’s own figures told a similar story, with applications up 12.5% to 17,191 in June ( from 15,275 in May) and lending up 14.3% to £3.44bn (from £3.01bn in May).”
BETTER RATES
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Mortgage approvals rose in June although they remain below the six-month average, illustrating the concerns and difficulties facing buyers.
“The effective interest rate paid on new mortgages jumped again to 4.35% while the rate on the outstanding stock of mortgages rose to 3.96%.
“On the ground, mortgage rates have risen back to the same level seen a month ago amid renewed tensions in the Middle East. Borrowers who will need a mortgage in coming months may want to consider securing a product sooner rather than later in case rates rise further in the short term.
“Remortgaging numbers picked up slightly, suggesting that borrowers may be shopping around for better rates rather than sticking with their existing lender when their current deal comes to an end.”
IMPROVING CONFIDENCE
Nathan Emerson, CEO at Propertymark, said: “The increase in net mortgage approvals for house purchases increased June suggests that buyers responded positively to a period of relative economic stability. However, approvals remained below the average recorded over the previous six months, indicating that while confidence may be improving, activity has yet to fully recover.
“A consistent Bank of England base rate, competitive mortgage products, easing inflation and a temporary reduction in geopolitical tensions are all likely to have supported buyer confidence during the month.
MARKET STIMULUS
Gareth Lewis, deputy CEO of specialist lender MT Finance, said: “Earlier this year, approval numbers started to pick up quite nicely, before dipping in May and now climbing again, albeit more modestly. We are now seeing the ramifications of the unstable interest rate environment and the impact this has on transactions.
“There urgently needs to be some stimulus for the housing market, with the new Prime Minister required to do something to encourage transactions and activity, which will also benefit the wider economy.
“Volatile funding rates are the real issue; while everything pointed towards a lower interest rate environment this year, the impact of war in the Middle East has since changed this outlook.”
MIXED PICTURE
Richard Pike, sales and marketing director at Phoebus Software, said: “May’s 15% drop in approvals followed a sharp spike in April as buyers rushed to lock in rates, so some correction was always likely.
“June’s figures are a mixed picture rather than a clean return to normality – approvals of 58,200 are up only modestly on May and still below the six-month average of 61,400, while net borrowing jumped to £7.7 billion, more than double May’s £3.3 billion.
“That jump points to April’s approvals working through to completion, and to the ongoing wave of fixed-rate maturities feeding through into gross lending, rather than any fresh surge in new buyer demand.
“A big part of this is the refinancing wave finally landing – borrowers coming off five-year fixes taken out when rates were near record lows are now rolling onto pricing that can be several percentage points higher, and for many that’s a genuine payment shock. Lenders and their servicing systems need to be ready to support these customers proactively, not just process the switch.
“The underlying story is still that swap rates remain volatile, driven by the escalating US-Iran conflict, and consumer confidence stays fragile. Approvals – the better guide to what’s coming next – simply aren’t showing the same strength as the net borrowing headline.
“Lenders have been repricing upward in recent weeks, and the impact of that, along with any post-MPC repricing, will show up more clearly over the next few months.”
