UK banks have enjoyed a spike in mortgage applications accompanied by sharply rising prices after the chaos following the mini-budget, according to new data from Barclays.
The bank notes, however, that pressure on incomes is growing with household spending starting to soften while the higher rates being charged on mortgages have long-term implications.
Barclays' analysts estimates that average 2 to 5 year UK mortgage pricing is up about 170 basis points (bp) - 1.7% - in the period since September 23, 2022, to around 6%.
“This is set to put pressure on customer affordability, and raises uncertainty over the outlook for house prices, albeit banks have a level of resilience to house price decline by virtue of low-LTV loan books," the analysts said.
Deposit pass-through on retail instant access products remains low, which is also generating a profits tailwind with only 12% of the September 50bp - 0.5% - hike passed on so far.
This is also good for the banks’ net interest income said the analysts at Barclays, but they noted "downside risk from a potential policy limiting remuneration on reserves held with the central bank”.
Lloyds Banking Group PLC (LSE:LLOY) comfortably had the biggest share of the UK mortgage market in 2021 according to Statista, followed by NatWest PLC and Nationwide.