U.K. February Mortgage Approvals Drop More Than Forecast

U.K. mortgage approvals fell more than economists forecast in February, underlining what Nationwide Building Society has said is an “uncertain” market.

Lenders granted 51,653 mortgages, the least since September, compared with a revised 54,187 in January, the Bank of England said today in London. Economists had forecast a decline to 53,700 from an initially reported 54,719, based on the median of 21 estimates in Bloomberg News survey. Net mortgage lending rose 866 million pounds ($1.32 billion).

Chancellor of the Exchequer George Osborne pledged 3.5 billion pounds in his budget on March 20 to help home buyers, while the Bank of England is seeking to boost credit with its Funding for Lending Scheme. Nationwide said last week that house prices were little changed in March from the previous month and the outlook was “unusually uncertain.”

“House prices may very well eke out a small gain over 2013 supported by modestly increased activity, but it seems unlikely that they will make a decisive move upward,” Howard Archer, an economist at IHS Global Insight in London, said before the data were released. “Periodic slips in house prices remain highly possible.”

A separate report showed an index of manufacturing rose less than forecast in March. Markit Economics and the Chartered Institute of Purchasing and Supply said their gauge increased to 48.3 from 47.9 in February. That’s below the 48.7 median forecast of economists in a Bloomberg survey.

The pound weakened against the dollar and was trading at $1.5217 as of 9:36 a.m. in London, down 0.1 percent from yesterday.

Gilt Purchases

The BOE data also showed that overseas investors increased their holdings of U.K. government bonds for an eighth straight month in February. Non-residents bought 7.48 billion pounds more gilts than they sold, after increasing their holdings by 1.55 billion pounds in January.

Consumer credit increased by 638 million pounds in February, with credit-card lending up 223 million pounds. Gross mortgage lending was 12.8 billion pounds in February, the report showed. Mortgage approvals remain at about half the monthly average recorded in the decade to 2007, when the financial crisis struck.

The BOE data also showed that, compared with a year earlier, lending to construction, manufacturing and real estate all fell in February. Loans to the transport, storage and communication industries also declined.

In a separate report, the BOE said that U.K. money supply fell 0.5 percent in February from the previous month. From a year earlier, M4 rose 0.5 percent.

A measure of M4 money-supply growth the central bank uses to assess the effectiveness of its asset purchases slowed to a quarterly annualized 3.1 percent from 5.8 percent in the period through January. That’s the slowest pace since the quarter through June. The gauge excludes financial companies that specialize in intermediating between banks, such as holding companies and non-bank credit grantors.

(Updates with manufacturing index in fifth paragraph.)
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