UK mortgage approvals fall to 4-month low in August
UK banks approved the fewest mortgages in four months in August as borrowing costs increased, a sign demand from buyers in the residential property market may start to slow.
By Agencies |
LONDON: UK banks approved the fewest mortgages in four months in August as borrowing costs increased, a sign demand from buyers in the residential property market may start to slow. Lenders granted 1,09,000 loans for house purchase, the least since April, the Bank of England said in London Monday. Economists forecast 1,10,000, according to the median of 24 estimates in a survey. The value of net mortgage lending fell to the lowest in one-and-a-half years.
Borrowing rates for home loans are rising after the central bank lifted its main interest rate to a six-year high in July and credit costs surged, forcing a bailout of mortgage lender Northern Rock last month. Monday’s report adds to signs that the property market is cooling as consumers pay back a record £1.4 trillion of debt. “People are finding it more difficult to buy a house,” said George Buckley, chief UK economist at Deutsche Bank in London, before the report.
“I wouldn’t be surprised to see house-price growth flatten. Both the property market and consumption should weaken.”
The net value of lending secured on homes fell to £8.5 billion, the lowest since February 2006, the central bank said. Overall net lending dropped to £9.5 billion from £10 billion in July.
Higher rates may hamper household spending after a US housing slump sparked a global credit squeeze. The London interbank offered rate that banks charge each other for three-month loans in pounds reached as high as 6.90% on September 11, the widest gap from the central bank’s benchmark rate in at least two decades. The rate was at 6.3% on September 28.
Banks such as Abbey, the second-largest UK mortgage lender, are passing the higher rates onto their customers. The average rate on a mortgage fixed for two years, the most popular type, rose to a seven-year high of 6.58% in August for borrowers with a 5% deposit on their homes, the Bank of England reported September 11.
Consumer spending has boosted UK expansion and has yet to show signs of slowing. Gross domestic product growth quickened an annual 3.1% in the second quarter, putting it on course for the best performance in three years, a government report showed September 26. Consumption rose 0.8% in the period, the most since 2006.
Consumer confidence still fell to the lowest in six months after a run on Northern Rock, which sought a bailout from the central bank, a GfK NOP survey showed September 28. Only a government guarantee ended the panic, which led former policy maker Richard Lambert to liken Britain to a “banana republic” in a September 26 speech.
Net consumer credit fell to £1 billion in August from £1.1 billion the previous month, the central bank said. Net credit card lending rose by £75 million, the least since May. Borrowing on personal loans and overdrafts rose by £928 million, the most in three months, Monday’s report showed.
Borrowing rates for home loans are rising after the central bank lifted its main interest rate to a six-year high in July and credit costs surged, forcing a bailout of mortgage lender Northern Rock last month. Monday’s report adds to signs that the property market is cooling as consumers pay back a record £1.4 trillion of debt. “People are finding it more difficult to buy a house,” said George Buckley, chief UK economist at Deutsche Bank in London, before the report.
“I wouldn’t be surprised to see house-price growth flatten. Both the property market and consumption should weaken.”
The net value of lending secured on homes fell to £8.5 billion, the lowest since February 2006, the central bank said. Overall net lending dropped to £9.5 billion from £10 billion in July.
Higher rates may hamper household spending after a US housing slump sparked a global credit squeeze. The London interbank offered rate that banks charge each other for three-month loans in pounds reached as high as 6.90% on September 11, the widest gap from the central bank’s benchmark rate in at least two decades. The rate was at 6.3% on September 28.
Banks such as Abbey, the second-largest UK mortgage lender, are passing the higher rates onto their customers. The average rate on a mortgage fixed for two years, the most popular type, rose to a seven-year high of 6.58% in August for borrowers with a 5% deposit on their homes, the Bank of England reported September 11.
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The housing market has shown mixed signals since the onset of the credit slump. Prices rose 0.7% in September, the fastest pace in three months, Nationwide Building Society said September 27. A separate Hometrack survey released Monday showed prices unchanged for a second month in September. Consumer spending has boosted UK expansion and has yet to show signs of slowing. Gross domestic product growth quickened an annual 3.1% in the second quarter, putting it on course for the best performance in three years, a government report showed September 26. Consumption rose 0.8% in the period, the most since 2006.
Consumer confidence still fell to the lowest in six months after a run on Northern Rock, which sought a bailout from the central bank, a GfK NOP survey showed September 28. Only a government guarantee ended the panic, which led former policy maker Richard Lambert to liken Britain to a “banana republic” in a September 26 speech.
Net consumer credit fell to £1 billion in August from £1.1 billion the previous month, the central bank said. Net credit card lending rose by £75 million, the least since May. Borrowing on personal loans and overdrafts rose by £928 million, the most in three months, Monday’s report showed.
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