June 30 (Bloomberg) -- U.K. mortgage approvals fell in May, dropping to the lowest level in 11 months, and the cost of new borrowing increased, adding to evidence that the property market may be cooling.
Approvals declined to 61,707 from 62,806, the Bank of England said today. That compared with forecasts for 61,800. The BOE also said the effective interest rate on new mortgages rose six basis points to 3.13 percent, the highest since August.
BOE Governor Mark Carney introduced measures to limit riskier mortgages last week and prevent an unsustainable buildup of consumer debt. New affordability tests that came in to effect in April are already having an impact on the market. House prices rose at the slowest pace in five months in June as buyers became more cautious on the outlook, Hometrack Ltd. said.
The cooling in housing follows a surge over the past year that saw mortgage approvals reached a six-year high in January.
The BOE data showed mortgage lending rose by a net 2 billion pounds in May, up from 1.7 billion pounds in April. Consumer credit increased by 740 million pounds.
Lending to businesses increased 3.4 billion pounds in May from April, the BOE said. It’s still down 3.1 percent in the past year. Loans to small- and medium-sized companies decreased 152 million pounds on the month.
M4, a broad measure of money supply, fell 0.1 percent in May from April and was down 0.9 percent from a year earlier. An underlying measure rose 2.7 percent on a 3-month annualized basis, the least since January.
Separately, the BOE said foreign investors bought a net 8.8 billion pounds of gilts.
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