U.K. Mortgage Approvals Rise to Highest Since March 2008

U.K. mortgage approvals rose to the highest in more than five years in July, adding to signs of a property-market recovery that Bank of England Governor Mark Carney says he is monitoring.

Lenders granted 60,624 mortgages, the most since March 2008, compared with a revised 58,238 the previous month, the BOE said today. Economists forecast that approvals would gain to 58,800 from an initially reported 57,667 in June, based on the median forecast of 18 economists in Bloomberg survey. Gross mortgage lending increased to the highest since November 2008.

Signs are mounting that U.K. housing is strengthening, with Nationwide Building Society saying today that prices rose 0.6 percent in August. The improvement follows government measures to boost demand, and Carney has said policy makers will act if any signs of a bubble emerge.

“The housing market has been a source of bright news recently,” Philip Shaw, an economist at Investec Securities in London, said before the data was released. Recent trends “have led to some fears that the housing market is beginning to overheat.”

Net Lending

Net mortgage lending increased by 707 million pounds ($1.1 billion) in July from June, while consumer credit rose 619 million pounds, the central bank said. Gross mortgage lending rose to 14.6 billion pounds.

The Nationwide report showed that house prices rose 3.5 percent in August from a year earlier to an average 170,514 pounds. Separate data today showed consumer sentiment climbed to the highest in almost four years.

“We are watching it closely,” Carney said in an interview with the Daily Mail published today, referring to the housing market. “We will as appropriate make our views known in terms of the degree of this risk and the potential action that should be taken to address it.”

While mortgage lending has risen in recent months, approvals are still below their average in the five years before the financial crisis. Carney has downplayed concerns about a property bubble, saying on Aug. 28 that the improvements “must be kept in perspective.”

Today’s report also showed that business lending rose 463 million pounds in July from June, which compares with an average decline of 1 billion pounds over the previous six months. Lending is still down 3.3 percent compared with a year earlier.

Lending to small- and medium-sized enterprises fell 894 million pounds on the month and is down 3.2 percent from a year earlier, the BOE said.

Separately, the central bank said M4 rose 0.6 percent in July from June and increased 1.8 percent from a year earlier.

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