U.K. Mortgage Approvals Fell Less Than Expected in Februaryby
Lending to small and medium sized firms at most since 2011
Bank of England publishes February lending data in London
U.K. mortgage approvals fell less than expected in February, a sign that demand for housing remained resilient before tax changes take effect in April.
Banks advanced 73,871 loans, compared with 74,085 in January, which was the highest level in two years, the Bank of England said in London on Thursday. While this was the first fall in five months, economists had forecast a bigger drop to 73,500. Net mortgage lending dipped to 3.6 billion pounds, from 3.7 billion pounds a month earlier.
The data underscore strength in the U.K. housing market as investors rush to buy properties before a tax increase on second homes and rental purchases. Officials at the central bank have warned buy-to-let mortgages represent a growing threat to financial stability and this week recommended tighter lending criteria and tougher affordability tests.
Demand is also being fueled by low borrowing costs, with the central bank saying the effective interest rate on outstanding mortgages fell one basis point to 2.95 percent in February. The BOE’s Financial Policy Committee is on the front line, using macroprudential measures to guard against risks from the housing market since benchmark rates have been at a record low 0.5 percent for more than seven years.
The effective rate on new secured loans rose to 2.5 percent.
Net lending to consumers rose 1.3 billion pounds in February, compared with 1.6 billion pounds in January. Business lending increased 3.3 billion pounds, with small and medium sized businesses taking 652 million pounds of loans, the most since the BOE began collecting the data in 2011.
M4, a broad measure of money supply, rose 0.9 percent on the month and 2 percent from a year earlier. An underlying measure of M4 increased 5 percent on a 3-month annualized basis.
The BOE also said overseas investors sold a net 3 billion pounds of gilts following net sales of 6.3 billion pounds in January.