Photographer: Jason Alden/Bloomberg

U.K. Mortgage Approvals at 3-Year Low as Housing Market Slows

Updated on
  • Lenders sign off on fewest home loans since January 2015
  • Unsecured lending stays solid with borrowing up 9.5% on year

U.K. lenders approved the fewest mortgages in almost three years in December as a Bank of England interest-rate increase added to the headwinds facing the housing market.

The number of approvals fell to 61,039, down from the 64,712 in November and the lowest since January 2015, the U.K. central bank said on Tuesday. At the same time, unsecured credit grew by 1.5 billion pounds ($2.1 billion), in line with the average of the previous six months.

The housing market has reflected the fortunes of the economy since the 2016 vote to leave the European Union, as a sterling-induced pickup in inflation squeezed the pockets of consumers. The slowdown has been most pronounced in London, where property prices are rising at their weakest pace in six years, according to Hometrack.

At the start of November the BOE pushed up the cost of buying a home by raising its benchmark for the first time in more than a decade. The interest rate on new mortgages climbed above 2 percent last month.

November also saw the government abolish a property tax for most first-time buyers, but there is little evidence in the latest figures that the initiative has helped to boost demand so far.

The 3,673 drop in approvals last month marked the biggest decline since May 2015. There was also a sharp fall in remortgaging -- to 46,475 from 53,890 in November -- after households rushed to lock in low interest rates before the widely anticipated BOE decision.

BOE Concerns

The rise in consumer credit last month was faster than economists forecast and left the annual rate of increase at 9.5 percent, up from 9.3 percent in November.

The pace of unsecured lending has been a worry for BOE financial-stability officials, who fear billions of pounds of debt could turn sour if the economy fell into another recession.

Separate BOE figures showed non-resident investors bought 488 million pounds of U.K. government bonds on balance in December following purchases of 8.65 billion pounds in November.

In 2017, net buying of gilts amounted to 22.7 billion pounds, about half the 44.4 billion pounds purchased the previous year.

Other figures showed that lending to non-financial businesses fell for a second month, declining by 1 billion pounds in December.

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