Focus on Bellway Plc and Cairn Homes Plc as The UK Mortgage Lending Slumps in April

Summary

  • Mortgage borrowing slumped to £3.3 billion in April from £11.8 billion in March.
  • The spike in mortgage borrowings for March was short-lived and probably caused by the ongoing stamp duty holiday.
  • However, experts had felt that the mortgage borrowings would continue to be high, at least in the short-term, driven by an increasing number of ready-to-react first time home buyers and savings built up during the pandemic.

The latest data from the Bank of England (BoE) revealed that the UK’s mortgage lending slowed down in April after record borrowings in the previous month. This was despite the fact that the average British house prices continue to race ahead, noted the Bank.

Mortgage borrowing slumped to £3.3 billion in April (March:  £11.8 billion). Last month’s value was the biggest rise since the series began in April 1993.

Further, the BoE said that the mortgage approvals for April were also low a with a value of 86,900. Although this level was above the pre-pandemic figures but was much lower than the peak of 103,400 observed last November.

Also Read: Banks Want Government to Overhaul Mortgage Support Scheme

Was March’s surge short-lived?

The central bank noted that the spike in mortgage borrowings for the month of March was short-lived and probably caused by the ongoing stamp duty holiday. The holiday was earlier due to end in March but is now extended till June.

Rishi Sunak, Chancellor, UK Exchequer, had announced on 3 March that the cut in stamp duty land tax for buyers was being extended till the end of June.

As per the holiday scheme announced last July, the first £500,000 of a property purchase remain exempt from any stamp duty. From 1 July, there will be a £250,000 tax-free allowance available until the end of September this year.

Also Read: Will The UK Housing Market Be Affected By The End Of The Current Terms?

Experts’ view

Experts, on the other hand had, expected the recent property market boom seen during the past few months to continue. They felt that the mortgage borrowings would continue to be high, at least in the short-term, driven by an increasing number of ready-to-react first time home buyers and savings built up during the pandemic.

Today’ mortgage data comes just a day after Nationwide building society released its home price tracker that reported strong growth of 10.9 per cent in May.

The BoE is also closely monitoring the economy for any indications of inflation. In fact, last week, Sir Dave Ramsden, deputy governor, BoE, said that its monetary policy committee was monitoring the UK housing market for any signs of sustained inflation.

Some experts also feel that the April pause could have been due to a shortage of houses coupled with people’s diverted attention from homes to summer holidays. They feel that the pause will be short-lived, and the lending will soon revive.

Let us now take a look at two prominent housing construction stocks in the UK.

Bellway Plc

Bellway (market capitalisation: £4.5 billion) is an England based residential property developer and a part of the FTSE 250 index at the London Stock Exchange.

The company’s share price (LON: BWY) was up 0.96 per cent to 3,695.00 pence in the afternoon trading hours on 2 June.

Cairn Homes Plc

Cairn Homes (market capitalisation: £0.69 billion) is a leading home builder based out of Ireland.

The company’s shares (LON: CRN) jumped to 92.70 pence on Wednesday afternoon, up 0.76 per cent from their previous day’s close price.

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