Aug. 30 (Bloomberg) -- U.K. mortgage approvals rose in July as borrowing costs remained at a record low, helping to provide support to the housing market.
Lenders granted 49,239 loans to buy homes, compared with 48,500 the previous month, the Bank of England said today in London. Economists forecast 49,000, based on the median of 19 estimates in a Bloomberg News survey. The reading is less than half the monthly average of 103,000 in the decade to 2007, before the financial crisis struck.
U.K. house prices fell for a fourth month in August and demand for homes may weaken further this year, Hometrack Ltd. said yesterday. While benchmark borrowing rates at 0.5 percent may help limit a drop in values, the Bank of England cut its economic growth forecast this month amid turmoil in the U.S. and Europe and as Britain’s government implements the biggest fiscal squeeze since World War II.
“The market remains essentially stagnant,” Andrew Goodwin, an economist at Ernst & Young’s ITEM Club, said in an e-mailed note. “We’re not going to see any significant change until there is a decisive improvement in lending conditions and that is unlikely to happen any time soon.”
Net mortgage lending rose by 700 million pounds ($1.14 billion) in July from June, while consumer credit increased by 200 million pounds, the least since January, the central bank said.
In a separate report, the National Housing Federation said home ownership in England will decline over the next decade as banks’ demands for larger deposits leave an “entire generation locked out of the housing market.” Ownership will fall to 63.8 percent by 2021, the lowest since the mid-1980s, from 67 percent currently, it said.
Hometrack said the average cost of a home fell 0.1 percent this month from July and was down 3.7 percent from a year earlier. A Nationwide Building Society index of consumer sentiment dropped 2 points to 49 last month, the lowest in three months.
U.K. economic growth slowed to 0.2 percent in the second quarter from 0.5 percent in the first three months of the year. The central bank’s forecasts show gross domestic product rising about 1.5 percent this year and 2.2 percent next year, less than its projections in May for 1.9 percent and 2.5 percent.
Policy makers held the key interest rate unchanged and their bond-purchase plan at 200 billion pounds this month. The deteriorating outlook for growth prompted Martin Weale and Chief Economist Spencer Dale to abandon a push for a quarter-point rate increase to contain inflation pressures. Consumer prices rose an annual 4.4 percent last month, more than double the central bank’s target.
A measure of M4 money-supply growth that the bank uses to assess the effectiveness of its asset purchases was 3.5 percent in the three months through July on an annualized basis, today’s report said. That compares with a 0.8 percent increase in the three months through June. The gauge excludes financial companies that specialize in intermediating between banks, such as holding companies and non-bank credit grantors.
Total M4 fell 0.1 percent in July from the previous month and was down 1.1 percent on the year, the Bank of England said.
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