U.K. Mortgage Approvals Flat in November

U.K. mortgage approvals (UKMSVTVX) were little changed in November as weakening consumer confidence and economic uncertainty restrained demand for property.

Lenders granted 52,854 loans to buy homes compared with a revised 52,786 the previous month, the Bank of England said today in London. While approvals have risen from about 47,300 a year ago and are at the highest in two years, the November reading is still less than half the monthly average of 103,000 in the decade to 2007, before the financial crisis struck.

Nationwide Building Society said last week that house prices may decline this year as the fallout from the euro-area sovereign debt crisis pushes up unemployment and undermines household sentiment. Some Bank of England policy makers have said the central bank may have to increase stimulus after they maintained the target for asset purchases last month.

“The modest rise” in approvals “fails to mask the fact that housing market activity remains very weak compared to long- term lows and has been unable to develop significant upward momentum,” said Howard Archer, chief European economist at IHS Global Insight in London. “Low wage growth, a markedly weakening labor market and major concerns over the economic outlook will limit potential buyers.”

Economists forecast that mortgage approvals would slip to 52,500 in November from an initially reported 52,743 in October, based on the median forecast of 13 economists in a Bloomberg News survey. Net mortgage lending rose 571 million pounds ($892 million) in November from October, while consumer credit increased 394 million pounds, the central bank said.

Construction

U.K. construction growth accelerated in December, according to a report today from Markit Economics and the Chartered Institute of Purchasing and Supply. Their index of building activity rose to 53.2 from 52.3 in November.

The pound erased its decline against the dollar after the reports. It traded at $1.5653 as of 10:18 a.m. in London, from $1.5649 yesterday.

Nationwide’s 2012 house-price forecast tallies with other predictions of falling or stagnating values next year. The Royal Institution of Chartered Surveyors and property researcher Hometrack Ltd. said in separate reports last month that prices will fall about 3 percent in 2012.

The Bank of England’s Financial Policy Committee said in December that the debt crisis in Europe had led to increased funding costs for banks. While the impact on the cost of loans for companies and households had so far been “relatively muted,” it said, if funding stresses persist, “credit conditions could be expected to tighten materially in 2012.”

Bond Purchases

The deteriorating economic outlook prompted Bank of England officials to expand their emergency bond-purchase program (UKAPTARG) by 75 billion pounds in October. The central bank held the target for bond purchases at 275 billion pounds last month and kept its benchmark interest rate at 0.5 percent. The bond program is scheduled to be completed in early February.

Separately today, the Bank of England said a measure of M4 money-supply growth it uses to assess the effectiveness of its asset purchases slowed to 3.7 percent in the three months through November on an annualized basis. That compares with 5.1 percent in the quarter through October. The gauge excludes financial companies that specialize in intermediating between banks, such as holding companies and non-bank credit grantors.

Total M4 fell 0.6 percent in November from the previous month, the biggest drop since December 2010, and was down 2.6 percent from a year earlier.

To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.