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Video transcript
The latest Market Commentary update from the Council of Mortgage Lenders has revealed the potential for a less favourable outlook in the UK mortgage sector in the months ahead.According to the body`s in depth market analysis, gross mortgage lending stood at £21.4 billion in July.
This represents a minor contraction from June which stood at £21.5 billion and is one per cent lower than July 2015 at £21.6 billion.
Responding to July`s data, CML chief economist Bob Pannell stated: `Indicators are likely to provide truer readings of market conditions the further we move away from the distorting effects of April`s stamp duty change.
`The subdued nature of property transactions and mortgage lending in July are consistent with a less positive backdrop for house purchase activity post-referendum.`
He went on to add that stronger economic headwinds are expected through the remainder of the year and into 2017, although measures implemented by the Bank of England to enhance UK monetary policy should have a positive impact.
A further cut in the UK base rate of interest has been `pencilled in` for later this year and this too could prove a positive move for the UK mortgage sector, although the Bank has been warned against any move into negative interest rate territory.
Mr Pannell believes the new Term Funding scheme will help to boost market sentiment in the months ahead. However, it is not yet clear how well the Bank`s actions will underpin improved borrower demand.
Looking forward, the CML has suggested market indicators are pointing towards a softening of outlook in the coming months, with a potential weakening of demand for homes and slowing house price inflation.
According to figures cited by the CML from HMRC, residential transaction volumes in July stood at just under 95,000. This marked the fourth consecutive month with a result lower than 100,000 and was a marginal contraction from June.
Moreover, the result was highlighted as potentially being the first true reflection of UK market outlook in the post-referendum period.
It therefore remains to be seen if the UK mortgage and remortgage sector will rally during the remainder of the year.
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