UK Mortgage Approvals Decline as Property Market Slows
Data from the Bank of England has revealed that British lenders approved the fewest mortgages in six months in August, pointing towards a slowdown in the property market as mortgage interest rates continue to rise. However, the figures also showed an increase in borrowing by consumers.
In August, banks and building societies approved 45,354 mortgages for house purchases, down from 49,532 in July. This number was broadly in line with economists’ expectations in a Reuters poll. Despite the decline in approvals, net mortgage lending – which typically lags behind approvals by around a month – reached its highest level since January at £1.218 billion ($1.49 billion), following an unusually weak increase of £201 million in July.
While mortgage approvals were down, new unsecured lending to consumers experienced a significant boost. It jumped by £1.644 billion ($2.01 billion) compared to the previous month, surpassing all forecasts in the Reuters poll. This followed a rise of £1.271 billion in July. The annual growth rate in unsecured borrowing also increased to 7.6% in August from 7.3%, reaching its highest level since April.
The decline in mortgage approvals reflects a broader trend of a slowdown in the property market as interest rates continue to rise. The Bank of England has raised interest rates twice since November 2017, which has made borrowing more expensive for homebuyers. This, coupled with uncertainties surrounding Brexit, has caused some potential buyers to hold off on purchasing property.
On the other hand, the increase in unsecured borrowing suggests that consumers are still willing to take on debt despite the tighter lending conditions. This may indicate that consumers are feeling confident about their personal finances and are willing to continue spending.
Experts have noted that the combination of declining mortgage approvals and rising unsecured borrowing could be a sign of the changing dynamics in the UK economy. While the property market may be cooling down, consumer spending remains resilient. This could have implications for the overall health of the UK economy and the Bank of England’s monetary policy decisions moving forward.
It is worth noting that the Bank of England is closely monitoring the property market and its impact on the wider economy. The central bank has expressed concerns about the potential risks of high household debt and has introduced stricter lending standards to prevent excessive borrowing.
Overall, the latest data from the Bank of England indicates a slowdown in the property market as mortgage approvals decline. However, the increase in unsecured borrowing suggests that consumer spending remains strong. With uncertainties surrounding Brexit and rising interest rates, the coming months will be a crucial period for the UK economy and the property market.
More detail via Investing.com UK here… ( Image via Investing.com UK )