U.K. mortgage approvals fell in May as the housing market slowed amid concern over the economic outlook.
Lenders granted 51,098 loans to buy homes, compared with 51,627 the previous month, the Bank of England said today in London. Economists predicted that approvals would drop to 50,000, based on the median forecast of 16 economists in Bloomberg survey. That’s still about half the monthly average in the decade to 2007 before the financial crisis struck.
Demand for homes has fallen as Europe’s debt turmoil casts a shadow over Britain’s economic prospects and increases funding costs for banks. Nationwide Building Society reported last week that house prices fell 0.6 percent between May and June.
“If the housing market is experiencing a fresh downward leg it may well be because of low consumer confidence,” said Philip Shaw, an economist at Investec Securities in London. “Since 2007 the level of housing activity has fallen off a cliff.”
With the economy struggling to recover from its second recession since 2009, the Bank of England will probably expand its so-called quantitative easing program this week.
The Bank of England and the Treasury will announce within weeks details on a new program to get the flow of credit moving again. A central bank survey taken in May showed households and companies face significantly tighter borrowing terms in the third quarter as lenders pass on higher funding costs.
Net mortgage lending was 563 million pounds, down from 1.05 billion pounds in April and the lowest since September last year. Net consumer credit rose to 732 million pounds from 379 million pounds in April. Net borrowing on credit cards rose by just 70 million pounds.
In a separate report, the central bank said M4 money supply fell 0.1 percent in May from the previous month and 4.1 from a year earlier.
A measure of M4 money-supply growth the central bank uses to assess the effectiveness of its asset purchases accelerated to 3.6 percent in the three months through May on an annualized basis, the central bank said. That compares with 2.8 percent growth in the three months through April. The gauge excludes financial companies that specialize in intermediating between banks, such as holding companies and non-bank credit grantors.