Households and businesses 'delayed financial decisions ahead of EU referendum'
HOUSEHOLDS and businesses put off major financial decisions in the weeks leading up to the EU referendum vote, a high street banking report suggests.
The number of mortgage approvals being made to home buyers in June was 11 per cent lower than the same period a year earlier, figures from the British Bankers' Association show.
Business borrowing also fell in June for the first time this year, indicating that investment decisions took a pause while the vote took place, the BBA said.
Some 40,103 loans were approved for house purchase in June, marking an 11 per cent fall compared with the 44,969 loans given the go-ahead for this purpose in June 2015.
Borrowing by non-financial companies decreased by £526 million in June, marking the first fall seen so far in 2016, the BBA said.
Dr Rebecca Harding, chief economist at the BBA, said: "This month's high street banking data reflects the uncertainty that was felt ahead of the EU referendum.
"Business borrowing in June dropped for the first time in 2016, signalling that investment decisions were being delayed until after the vote."
She continued: "Overall, business confidence was clearly fragile in anticipation of the outcome of the vote, but these results are not a verdict on the health of the economy post-Brexit. We won't start to see that data come through until the autumn and any trends before then should not be over-interpreted."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics said: "The weak level of activity in June also probably reflected the lingering impact of April's rise in stamp duty on buy-to-let and second home purchases, which encouraged many buyers to bring forward planned transactions to (the first quarter of 2016).
"The BBA did not indicate whether approvals were weak throughout June, or merely after the referendum on June 23. The sharp decline in surveys of house price expectations and profit warnings from estate agents since the vote, however, signals that mortgage demand has fallen further in recent weeks."
The BBA also said the amount of money flowing into personal deposits has been growing more strongly in recent months and annual growth has risen to 5 per cent.
Consumer credit continued to show annual growth of over 6 per cent in June, which the BBA said possibly reflects favourable borrowing rates.