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U.K. Mortgage Approvals Beat Estimates as Banks Make More Funds Available
U.K. mortgage approvals were little changed in July, signalling that the housing market remains sluggish as the government implements the biggest budget squeeze since World War II.
Lenders granted 48,722 loans to buy homes, compared with a revised 48,562 in June, the Bank of England said today in London. Net lending for homes dropped to 86 million pounds ($133 million) from 518 million pounds, the lowest since March.
U.K. home values fell in August by the most in 16 months as the housing market endured a “modest re-pricing” that is likely to last as long as a year, Hometrack Ltd. said yesterday. Britain’s economy “remains fragile” and officials may need to expand their emergency stimulus to aid the recovery, Bank of England Deputy Governor Charles Bean said on Aug. 28.
“The economic fundamentals are far from ideal for the housing market,” said Howard Archer, chief U.K. economist at Global Insight IHS in London. “Housing-market data and survey evidence has been consistently downbeat recently.”
Economists forecast that July approvals would decrease to 46,500 from an initially reported 47,600 in June, based on the median forecast of 19 economists in Bloomberg News survey. The July figure compares with 53,126 a year earlier and is less than half the level at the peak of the housing boom in 2007.
While there was a “marginal rise” in mortgages, the “bigger picture is still of subdued activity,” said Paul Diggle, an economist at Capital Economics Ltd. in London. “There is little chance of a marked improvement in the next 12 months.”
‘Growing Weakness’
Tighter lending standards at banks and concern that government spending cuts to reduce the budget deficit will restrain economic growth are curbing property demand. Hometrack said yesterday the average cost of a home fell 0.3 percent in August, the most since April 2009.
There is a “growing weakness” in demand for housing, “which represents more than just a seasonal blip,” said Richard Donnell, director of research at Hometrack.
While an index by GfK NOP Ltd. published today showed consumer sentiment increased in August by 4 points to minus 18, the gain “merely reverses a similarly large drop in July,” the research group said.
Data released last week showed U.K. gross domestic product expanded 1.2 percent in the second quarter, the fastest pace since 2001. The report also showed slower services growth than previously estimated and a drop in fixed investment.
Today’s data also showed credit card lending rose a net 213 million pounds, the most since February. Households repaid a net 41 million pounds of personal loans and overdrafts.
A measure of M4 money-supply growth that the central bank uses to assess the effectiveness of its asset purchases slowed to 5.6 percent in the three months through July on an annualized basis, the least since March. The gauge excludes financial companies that specialize in intermediating between banks, such as holding companies and non-bank credit grantors.
To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net
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