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U.K. Mortgage Approvals Little Changed on Consumer Uncertainty

U.K. mortgage approvals were little changed in August as net lending on homes fell the most in almost three years.

Lenders granted 47,665 mortgages, compared with a revised 47,556 the previous month, the Bank of England said today in London. Economists forecast that approvals would gain to 49,200 from an initially reported 47,312 in July, based on the median forecast of 22 economists in Bloomberg News survey. Net mortgage lending fell 276 million pounds, the most since December 2010.

Property research company Hometrack Ltd. said today house prices fell in September on weak demand and that the market may come under further pressure as the uncertain economic outlook undermines consumer confidence. The Bank of England will probably maintain the size of its bond-buying plan this week as officials assess the impact of their Funding for Lending Scheme aimed at boosting credit.

“House prices are likely to trend modestly lower over the latter months of 2012 and very possibly beyond,” Howard Archer, an economist at IHS Global Insight in London, said before the data were released. “It’s very possible that they could fall further and longer due to still serious downside risks to the U.K. economic outlook, both from domestic factors and from the euro zone’s problems.”

Consumer credit declined for a second month in August, falling 134 million pounds, according to today’s report.

U.K. home prices fell 0.1 percent in September from August, Hometrack said. The number of new buyers registering with real- estate agents fell the most in eight months. Richard Donnell, Hometrack’s director of research, said that the “uncertain economic outlook, together with affordability pressures, will continue to act as a drag on housing-market activity.”

Lending Strain

Banks have curtailed lending since the financial crisis to strengthen balance sheets. The lack of credit supply has hurt the housing market as potential buyers struggle to raise the large deposits demanded by lenders. Mortgage approvals are at less than half the monthly average of 103,000 in the decade to 2007 before the financial crisis struck.

The Bank of England’s Monetary Policy Committee will keep its bond-purchase target at 375 billion pounds on Oct. 4, according to the median forecast of 40 economists in a Bloomberg survey. The central bank is currently buying 50 billion pounds of gilts in a program due to end in November.

A measure of M4 money-supply growth that the central bank uses to assess the effectiveness of its asset purchases rose 7.8 percent in the three months through August on an annualized basis, the central bank said in a separate release. That’s the fastest since the third quarter of 2007, based on quarterly calendar data. The central bank’s rolling three-month series began in September 2009.

The gauge excludes financial companies that specialize in intermediating between banks, such as holding companies and non- bank credit grantors.

Total M4 was up 0.2 percent in August from July and fell 4.1 percent from a year earlier.

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

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

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