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Sharp rise in mortgage lending in June

Gross mortgage lending rose by 16% last month compared with May to reach an eight-year high for the month of June, according to initial estimates.

Total loan advances reached £20.7bn, up 3% year-on-year, and the highest June figure since 2008, according to the Council of Mortgage Lenders (CML).

However, despite the increase, the total was below the £26.1bn lent out in March, when buy-to-let investors rushed to buy property ahead of the introduction of the 3% stamp duty surcharge at the start of April.

Nevertheless, the latest data from the CML which reflects the run-up to the EU referendum, suggests that homebuyers did not adopt a wait and see policy until after the result of the vote.

“The positive indicators were there if one looked beyond the rhetoric of the daily bombardment of contradicting referendum messages. Mortgage lenders stayed calm, rates stayed low and many lenders looked to build market share with competitive deals,” said Henry Woodcock, principal mortgage consultant at IRESS.

Based on the latest estimate, gross mortgage lending for the second quarter of 2016 was £56.1bn - 10% lower than the first quarter of the year but 8% higher than Q2 2015.

But the CML said lending activity was likely to soften in the coming months.

CML senior economist, Mohammad Jamei, commented: “The result of the EU referendum is likely to affect the housing market, but there remains considerable uncertainty. Although mortgage firms have ample lending capacity, activity levels are likely to bear the brunt of any market adjustment over the next six months or so, as buyers and sellers wait to get a clearer idea of where we might be headed.

“But as with the economy, the UK housing market’s starting position is relatively favourable, with transactions having increased by almost 80% from post-crisis lows. Over the next six months, activity is likely to soften modestly, while lending will be driven more by remortgaging and less by house purchases.

“We also expect some form of monetary easing to be undertaken by the Monetary Policy Committee when it meets on 4 August, given the uncertain outlook that has set in after the vote result.”

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