The mortgage market continued to tread water in June as households look for some certainty about when the Bank of England might start cutting interest rates.
Bank of England data showed that the number of mortgage approvals, which indicate future borrowing, remained broadly steady in June at just under 60,000.
Approvals for remortgaging meanwhile decreased to 27,500 from 29,300 previously.
The figures suggest that the mortgage market is struggling to build on the momentum seen at the turn of the year, when hopes of early rate cuts fuelled a mortgage price war.
In the first quarter of the year, mortgage approvals steadily rose on the back of falling rate expectations, reaching a peak of just over 61,000 in March. This was the highest level since the mini-budget in September 2022.
But rate-setters at the Bank of England have been reluctant to cut interest rates over the past few months, citing concerns over the persistence of inflation. Uncertainty over the direction of interest rates has put upward pressure on mortgage rates, stifling demand.
The effective interest rate, the actual interest paid on newly drawn mortgages, rose very slightly to 4.82 per cent in June.
However, investors are confident that the Bank will cut rates in the next couple of months, potentially this week, which should help bring mortgage rates back down.
Last week, Nationwide became the first large lender since April to offer a five-year fix at an interest rate below four per cent.
Peter Arnold, EY UK chief economist, said mortgage approvals might “edge up” in the coming months as rate expectations fall, but he doubted there would be much progress.
“With market pricing already factoring in a gradual loosening of monetary policy over the coming year, the EY ITEM Club doesn’t expect mortgage rates to fall much further. And with affordability still very stretched, the chances of a strong recovery in activity look low,” he said.
The data also showed that consumer borrowing dipped slightly in June to £1.2bn from £1.5bn previously.
Karim Haji, global and UK head of financial services at KPMG, said the dip reflects the fact that consumers are still waiting to feel the positive effects or a rosier economic outlook.
“Despite two straight months of inflation remaining on-target, households aren’t necessarily feeling better off for it,” he said.