Despite Sluggish UK Economy, 2018 Experiences a Rise in Mortgage Lending

Earlier this year, the mortgage market forecasts for 2018 and 2019 were declared: “We are a little more optimistic in the next two years than a year ago, we expect more buyers for the first time in the next two years, helped in part by competitive mortgage rates and government housing schemes. Data on moving companies has improved slightly in 2017, but it looks like they will remain stable in 2018 and 2019, as they benefited less from government support and the number of owners of houses that resell with a new lending institution has grown strongly in 2017 and we expect this to continue in the medium term.

“Tax and regulatory changes are part of the several factors that are sinking confidence in the rental purchase market, which has resulted in a moderate activity of house purchase by owners since mid-2016 and we expect more of them in the next two years.”

So far, the forecast isn’t off the mark.

Mortgage Loans and Credit Traffic

Mortgage loans rose by almost a tenth in January, but business investment loans decreased due to the uncertainty brought by Brexit, according to official figures that depict a “slow” image of the UK economy.

Total mortgage loans rose by 9.7% to GBP 21.9 billion in January compared to the same month last year, according to UK Finance, the institution that represents all major banks. Most of the mortgage credit is thought to result from a stamp duty cut, although the rebound stems from low levels, and since September 2016, total loans have been at the third lowest level.

Loans to companies contracted by 1.4%, with a decline in construction. Credit card spending increased by 5.8%, much faster than personal income growth, although banks said that credit card reimbursement levels were also high.

The figures suggest that borrowers are abandoning personal loans, because they don’t fully know the process involved – although there is lots of information about mortgages online –  which have fallen by 15% in the month; people seem to now prefer to borrow through their credit cards. Despite concerns over excessive household debt, credit card companies continue to propose offers for up to 37 months without interest. Deposits with banks and construction companies recorded only 2% growth this year, reaching a total of GBP 835 billion, while ISA products continue to record returns.

The Warning: Sluggish Economy

UK Finance warned that global figures suggest that the UK economy is “slow”. “While January data showed an increase in consumer confidence and an improvement in wage growth, the underlying long-term framework aims to slow growth.

“It is expected that families will continue to experience their finances shrinking and, consequently, their tendency to spend, since real gains, if adjusted to inflation, are still much lower than the rate of inflation, the increase in debt service costs, as part of disposable income “.

There was a note of caution that inflation will remain high, which will result in low-level consumer spending and will limit the prospects for economic growth. Meanwhile, companies are adopting a “wait and see” attitude to invest, as uncertainty about Brexit and growth continues to be affected.

UK Finance has noticed an inconsistency between the strong business confidence and the outdated investment levels.

Stephen Pegge, UK Finance, said: “Business confidence remains positive with confidence in short-term trading conditions driven by the recovery in international markets, levels of investment remain virtually unchanged and loans continue to be more cautious, since that companies adopt an attitude of “expectation and vision” in the face of commercial uncertainties, choosing to use their deposits as shields for outlay decisions “.