UK mortgage approvals at 13-month low

Britain’s economy has slowed as higher inflation eats into households’ disposable income

British banks approved the fewest mortgages for house purchases in over a year last month, while existing homeowners rushed to refinance loans ahead of a widely expected Bank of England rate rise earlier this month.

Credit card lending also grew at its weakest rate since December and the overall rate of credit card lending growth slowed, trade association UK Finance said yesterday.

Britain’s economy has slowed since the start of the year as higher inflation since June 2016’s Brexit vote has eaten into households’ disposable income. The BoE has urged banks to set extra money aside against the risk of bad consumer loans.

Banks approved 40,488 mortgages for house purchase last month, down from 41,576 in September and 3 per cent less than in October 2016. However, the number of remortgages jumped to 34,036 from 30,499.

“The anticipated Bank Rate rise saw a flurry of remortgage activity as many homeowners took advantage of the competitive rates on offer,” said Mohammad Jamei, senior economist at UK Finance.

At the start of this month the BoE raised interest rates for the first time in a decade, although it expects the pace of further increases to be very gradual.

Earlier yesterday, a survey from polling company YouGov and economics consultancy CEBR showed consumer sentiment had fallen to its lowest since just after the Brexit vote.

The UK Finance figures showed annual growth in credit card lending slowed to 5.1 per cent in October from 5.5 per cent the month before, and net credit card lending was its weakest since December at £81 million (Dh396 million).

Lending to non-financial businesses dropped by a net £1.501 billion, the sharpest fall since February.