Bricks (2)

Mortgage approvals by UK banks have fallen in July to their lowest level this year suggesting people are holding back on significant financial purchases after the Brexit vote.

The British Bankers’ Association said Britain’s banks approved 37,662 mortgages last month compared to 39,763 in June, and a 19% decrease from July 2015, according to new figures.

The overall number of approvals were higher in January to June this year compared to where they were a year before.

The figures show that although house mortgage approvals were lower year-on-year, the use of credit cards has been growing at a faster annualised rate of 6% than the real earnings growth rate of 2.4% for a few months now. This indicates the referendum vote has had little impact on consumer spending on smaller purchases.

Rebecca Harding, the BBA’s chief economist, said that it was impossible to conclude much from one month of data and it would take a few months to see any major impacts from the vote to leave the European Union.

Ms Harding said: “Consumer credit has been growing considerably faster at an annualised rate of 6% than real earnings growth of 2.4% for some months now. This arguably underpinned the growth in retail sales that we saw in July and suggests, year-on-year growth in consumer credit appears reasonably correlated with year-on-year growth in retail sales.

“The housing market may be giving us a clearer picture of trends. Net mortgage lending continued to rise annually at 3% in July. This figure is identical to the annual increase in June. However, mortgage approvals for house purchases were 19% lower in July than a year earlier.”

1.4 billion bricks needed to fix the housing market

Although house prices continue to increase, with an annualised growth of 8.7% in July, the shortage of brick supply has been another factor in the rising house prices, according to the the Bricks Report from National Association of Estate Agents (NAEA), compiled with the Centre for Economics and Business Research (CEBR).

Even with willingness from contractors to build homes following Brexit, the UK’s construction sector would require a total of 1.4 billion bricks in order to resolve the housing shortage in the UK, the report said.

While house prices are impacted by numerous macroeconomic factors, they are fundamentally driven by the supply and demand of housing units. The shortage of homes has led to sharp house price appreciation and prevented many prospective buyers from getting onto the property ladder.

The NAEA say the impact of Brexit could significantly worsen the issue. In 2015, 85% of all imported clay and cement, primary brick components, came from the EU, and so depending on how trade negotiations develop, Brexit could have a considerable impact on supply.

Mark Hayward, managing director of NAEA, said: “We all know that the massive lack of supply in housing is an issue that needs resolving urgently. As well as freeing up more land to ensure we can build the right sort of houses in the right places, it’s crucial we have the right materials and skills to do so.

“It seems a simple consideration but the fact that we don’t have enough bricks to meet demand has a very real effect and holds up the process from beginning to end. We’re concerned that the impact of the EU Referendum means this problem could get worse as we rely on the import of brick components from the EU and of course many of our skilled labourers come from there too.”