Net mortgage lending of UK banks rose in January, as home owners sought to fix their costs, resulting in an increase in refinancing activity, according to data from the British Bankers Association (BBA).
Net mortgage lending surged £1.6 billion last month, up from the £0.9 billion recorded in December. The number of remortgage approvals also rose to 26,109 in January from December’s 24,946. However, mortgage approvals rose only slightly, up to 28,932 in January from 28,907 in December.
Meanwhile, predictions that the Bank of England will soon increase mortgage rates strengthened on Wednesday, after three of the board’s nine members agreed to an increase during the February policy meeting.
“Any early interest rate hike would be bad news for the housing market and likely to weigh down on prices — not just the rate rise itself but also the impact on potential house buyers’ psychology, resulting from the fact that they would be facing rising interest rates with the prospect of more to come,” said Howard Archer, Chief European and UK Economist at IHS Global Insight.
Paul Diggle, a property economist from Capital Economics, also said that a near-term interest rate increase meant that refinancing may receive a temporary aid, as existing borrowers will take out fixed rates.
Mr. Archer stressed that “this is a reflection of current very low consumer confidence and is the consequence of an uncertain and somewhat worrying longer-term outlook for the economy and jobs as the major fiscal squeeze increasingly kicks in over the coming months. Meanwhile, there remains limited availability of unsecured credit from banks.”