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Mortgage approvals for home buyers fell to their lowest level in almost a year-and-a-half in November, the Bank of England has reported.
Some 59,029 approvals for home loans with a total value of GBP 9.6 bln were recorded for house buys, marking the lowest monthly level since June 2013.
Meanwhile consumer credit, comprising borrowing on credit cards, loans and overdrafts, saw the strongest increase since 2008 in the run-up to Christmas as shoppers took advantage of store promotions.
Consumer credit increased by GBP 1.3 bln in November, higher than the average monthly increase of GBP 1 bln seen over the previous six months and the largest upswing since a GBP 1.4 bln rise in February 2008. Analysts said the surge in consumers snapping up items on Black Friday likely contributed to the high borrowing levels.
Within consumer credit, credit card lending increased by GBP 269 mln in November, which is above the typical GBP 200 mln monthly uplift of recent months.
Personal loan and overdraft borrowing jumped by GBP 983 mln, which was also higher than the recent average monthly increase of GBP 700 mln.
The figures, contained in the Bank’s Money and Credit report, echo findings from the British Bankers’ Association (BBA) which were released in December.
The BBA found that the number of mortgage approvals made to home buyers slid by a fifth in November compared with the same month last year as a “sharp chill” set into the housing market.
It also said that annual growth in consumer borrowing using credit cards, overdrafts and personal loans continued to grow at the fastest rate seen in six years, reflecting an easier borrowing climate and improved household finances.
Several experts have said that they do not expect the slide in housing market activity seen in recent months to last for long.
In December, the Government announced a complete overhaul of stamp duty, a move which is expected to prompt a fresh uplift in activity early this year as more people are encouraged to buy and sell homes.
The overhaul has ended the much-criticised “slab” structure of the duty in favour of a graduated version of the tax. Under the new system, a home buyer will only pay the rate of tax on the part of the property price that falls within each tax band, in a similar way to income tax.
The Bank of England data provide ongoing evidence that the housing market ended 2014 on the back foot, said one analyst, adding that some pick-up is expected in housing market activity in 2015 from the current lows, although the increase in activity will be relatively limited thereby keeping a lid on house price increases. On the assumption that there will be some pick-up in housing market activity during 2015 from current lows, they expect house prices to rise by a solid but unspectacular 5% this year.