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Mortgage Approvals Increase Ahead of Brexit Despite Fears

Approval of mortgages prior to the UK's EU referendum last week increased in the lead up to the vote, contrary to predictions from economists, say reports.

Approval of mortgages prior to the UK's EU referendum last week increased in the lead up to the vote, contrary to predictions from economists, say reports.

Figures published by the Bank of England (BOE) show that home loans increased by 1.27% ahead of the UK’s referendum to the surprise of many economists, whom expected a decline.


In May, the BOE approved 67,042 home loans, an increase from the 66,205 in April. Although, effective interest rates on new mortgages remained at 2.41% in May – the lowest since 2004.


Data from the BOE shows that the cost of a three-year fixed loan with a 25% down payment is at its lowest cost since 1995. The low costs of mortgages resulted in a rise in lending from the BOE to 2.8 billion pounds in May, while consumer credit increased 1.5 billion pounds.


Similarly, the Council of Mortgage Lenders (CML) reported a 14% year-on-year increase in gross home lending – the highest level for the month of May since 2008.


On a monthly basis, the CML reported that gross mortgage lending in the UK increased by 4%. According to CML, British banks approved 42,187 mortgages for house purchases in May – up from 39,967 in April.


Given the market turmoil following the UK’s referendum and vote to leave the EU, markets have shown signs of interest cuts in the upcoming months.


The Bank of England’s governor Mark Carney commented following the referendum results that “the bank will not hesitate to take additional measures as required as those markets adjust and the U.K. economy moves forward.”


With the interest rates likely to go down in the short to medium term, investors in the private rented sector could benefit greatly from the current and upcoming market trends.

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