Societe Generale Investment: Bank of England interest rate hikes still can't stop the "lending tide"?

Although UK borrowers have experienced the highest interest rates in 15 years,In the UK, mortgage approvals rose in June, and consumer credit grew at the fastest pace in five years.

MondayThe data shows that,Net approvals for home purchase mortgages rose to 54,700 in June from 51,100 in May, beating expectations. Remortgage approvals rose to 39,100 from 34,100. Net borrowing on consumer credit rose to £1.70 billion, the highest level since 2018, which could further support the Bank of England's argument for a rate hike this week.

Thomas Pugh, an economist at auditor RSM UK, said: "The economy probably ended the second quarter on a strong full-year footing."

Monday's data also showed that consumers are more confident about spending in other areas. The Bank of England said,Credit card lending remained stable, while consumer credit, including auto dealer financing and personal loans, increased.But Pew warns:

"The lagged effect of the large rate hikes that have already occurred, combined with the risk of further rate hikes, could easily tip the economy into recession later this year."

Since December 2021, the Bank of England has raised interest rates from 0.1%.The central bank is expected to raise interest rates further at its monetary policy committee meeting on Thursday.

However,The data shows that,The sharp rise in interest rates has had a slow impact on mortgage rates.

The BoE said the "real" interest rate on new mortgages - the rate actually paid - rose only seven basis points to 4.63 per cent in June, a relatively small increase. The real rate on the stock of outstanding mortgages rose 10 basis points to 2.92 per cent.

Andrew Wishart, a real estate economist at consultancy Capital Economics, said it takes two to three months for mortgage rate quotes to be reflected in real estate market activity, soThe June data reflected a previous decline in mortgage rates.

Mortgage approvals are already well below pre-epidemic averages.The inflation data has improved, and the Bank of England may stop raising interest rates earlier than expected, but the market is unlikely to recover in the short term.

Richard Donnell, research director at real estate portal Zoopla, added that high mortgage rates are hitting home sales across the country"Not exactly the same"The effect is most pronounced in the south of England. In areas where house prices are lower, the cost of buying a property with a 5.5% mortgage is still lower than the cost of renting. "

According to estate agency Hamptons, the average rent in the UK was £1,283 in June, 28% higher than in February 2020 when the epidemic broke out.

Nicholas Mendes, a mortgage technology manager at John Charcol, said that in recent weeks,The brokerage firm has seen an increase in demand for tracking mortgages (loans where interest rates can fluctuate).He added:

"Historically, fixed rates have been the default choice for homeowners. Now more and more borrowers are choosing to track rates in the hope that they will continue to decline and seek to lock in a lower fixed rate in the coming months."

Chris Druce, a senior research analyst at real estate firm Knight Frank, said that while the housing market may avoid a "cliff moment" this year,But a "dramatic shift" remains unlikely,Societe Generale InvestmentKeep watching the current situation of the British Bank.