UK mortgage approvals increased for the first time in six months in February despite rising interest rates and high inflation weighing on the housing affordability.
Mortgage approvals for house purchases increased to 43,500 in February from 39,600 in January, the Bank of England reported Wednesday. This was the first monthly increase since August 2022. This also exceeded economists’ forecast of 40,500.
The ‘effective’ interest rate, which is the actual interest rate paid on newly drawn mortgages, increased by 36 basis points to 4.24 percent in February.
The Bank of England has lifted the bank rate by 415 basis points in the current tightening cycle that began in December 2021 with an aim to bring inflation down to the 2 percent target.
Housing market activity logged a sharp downturn last September following the mini-budget announcement under the leadership of Liz Truss.
Reflecting the partial unwinding of the spike in mortgage rates following the “mini” budget, mortgage approvals rose to their highest level for three months in February, Capital Economics economist Andrew Wishart said.
With mortgage rates unlikely to fall much further in the near term, lending will remain weak, Wishart noted. The economist forecast that approvals will be 30 percent lower this year than in 2022.
Secured lending to individuals unexpectedly declined in February to GBP 0.7 billion from GBP 2.0 billion in January, data showed. Lending was expected to rise to GBP 2.4 billion.
Excluding the pandemic period, mortgage lending was the weakest since April 2016.
The net consumer credit fell to GBP 1.4 billion from GBP 1.7 billion in January. The expected level was GBP 1.3 billion.
This GBP 1.4 billion was split between GBP 0.6 billion of borrowing on credit cards and GBP 0.8 billion of borrowing through other forms of consumer credit.
The annual growth in consumer credit rose to 7.7 percent in February from 7.5 percent a month ago. This was the fastest growth since November 2018.
Source: Read Full Article