UK mortgage approvals hit 13-year high in August as post-lockdown surge continues
UK mortgage approvals hit a 13-year high in August as pent-up demand post-lockdown continued to boost the housing market, but consumers became more cautious about day-to-day borrowing.
Mortgage approvals for the month were 84,700, according to new data from the Bank of England — the highest rate of approvals since October 2007, just before the global financial crisis.
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However the surge in approvals only partially offset weaknesses in mortgage lending between March and June. So far this year a total of 418,000 mortgages have been approved, below the 524,000 approved in the same period in 2019.
Consumer borrowing and repayments also remained below pre-Covid levels, indicating that consumers are becoming more cautious about making big purchases with credit.
Consumer borrowing, a key driver of economic growth, increased by around £300m in August from July — substantially lower than the £1.45bn increase predicted by economists polled by Reuters.
Compared with August last year, consumer borrowing sank by 3.9 per cent, the sharpest fall since the BoE began measuring the data in 1994.
“Despite the resurgence in the housing market, consumer credit barely rose in August,” said Capital Economics’ Thomas Pugh.
“And the darkening clouds on the economic horizon may tempt some households to start to rein in spending in the months ahead,” he added.
Economists polled by Bloomberg had predicted that 71,300 mortgages would be approved during August, while a Reuters estimate had put the figure at 71,000 approvals.
“August’s further rise in mortgage approvals provides ongoing hard evidence of the marked short-term pick-up in housing market activity since the easing of restrictions that started in mid-May, which released pent-up demand,” said Howard Archer, chief economic advisor to the EY ITEM Club.
“This buoyancy has been reinforced by the Chancellor raising the Stamp Duty threshold to £500,000 from mid-July through to 31 March 2021,” Archer added.
The new figures suggest that the economic recovery from the downturn caused by Covid-19 was “already starting to slow” in August, Pugh said, even before the government introduced new restrictions to limit the spread of the virus.
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“Those restrictions and rising unemployment will put a further dampener on consumers’ ability to spend,” he continued.
“And the prospect of a no deal Brexit is having a chilling effect on business investment. Overall, we doubt that the economy will grow by much, if anything, over the next few months.”