The FTSE 100 shot up into the green this morning after official Q2 GDP data showed that the UK economy remains resilient, growing 0.2% despite high inflation and the cost-of-living crisis.
To complement this, quarterly growth for Q1 was revised upwards to 0.3% from 0.2% On an annualised basis, the UK economy grew 0.6%, higher than estimates of 0.4%.
Today’s GDP report shows that the UK economy grew faster than its G7 rivals in 2022 as UK growth was revised upwards to 4.3% to 4.1%, and 8.7% growth in 2021. While this normally would stoke fears of further rate hikes, markets seem to have shrugged it off.
On the flip side, mortgage approvals in August resumed their downward slide as higher interest rates continued to dampen demand. According to Threadneedle Street, net mortgage approvals for house purchases fell from 49,500 in July to 45,400 in August.
Still, the outlook for September looks to be brighter with mortgages now creeping below the 5% mark on the back of the Bank of England’s decision to pause its rate-hiking cycle earlier this month. Even so, there’s an element of caution among brokers.
Craig Fish, managing director at Lodestone Mortgages & Protection said: “While we have witnessed some healthy competition between lenders on their pricing, most of this has been aimed at those purchasing property and not those remortgaging where it’s needed the most. It seems lenders think that marginal reductions can kickstart the property market again, and sadly this isn’t the case due to the negative outlook for property prices. It may be Christmas soon, but the economy and mortgage holders will certainly not be celebrating in 2023.”
His views were echoed by Justin Moy, managing director at EHF Mortgages said, “There have been plenty of positive rate cuts throughout September, and a more positive outlook from borrowers both existing and new. However, this trend could easily change direction in October, if there is even a whiff of an inflation increase or weakness in other UK economic data. Homebuilders will be looking for more green shoots, and perhaps some government intervention, as well as further rate cuts to help sell their properties. We are definitely not at the bottom yet.”
Despite the weak showing in mortgage approvals, FTSE 100 housebuilder stocks were comfortably in the green on Friday, while lenders such as Lloyds, Barclays and NatWest were also enjoying the market rally.
But Stephen Perkins, managing director at Norwich-based Yellow Brick Mortgages, cautioned, “While it’s good to see the markets having a good day for once, the UK economy doesn’t usually impact the FTSE 100 too much as most companies in it are huge multinationals on which the UK economy doesn’t hold much sway.”
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