Mortgage approvals from banks lowest for 5 years, survey shows
High street banks approved the fewest mortgages for housebuyers for nearly half a decade in December, according to figures published on Thursday by UK Finance, the lobby group formed last year from the merger of the British Bankers' Association and the Council of Mortgage Lenders.
The number of mortgage approvals for house purchases dropped 21 per cent in December, to 24,840, compared to the same month a year earlier. The number of remortgaging approvals fell 14.6 per cent year-on-year, to 21,920.
The figures showed the smallest number of approvals for house purchases in a single month since April 2013.
However, December is often a weak month for the housing market and the drop recorded last month followed two strong months in October and November. The relatively weak figures may also reflect borrowers trying to avoid the impact of a widely-anticipated Bank of England interest rate rise in November.
Neal Hudson, director at Residential Analysts, a market research firm, said the drop in December had been exaggerated by a strong market in October and November. "December falls off further in 2017 than it did in 2016 and 2015, but it's still better than in 2013 and 2014," he said.
Brokers said the UK Finance figures cover banks responsible for about 70 per cent of the overall UK mortgage market. Forthcoming figures from UK Finance will give a broader picture of the market, including building society lenders.
The UK Finance figures show a much sharper drop than separate data released by HM Revenue & Customs measuring the number of completed transactions in December.
According to HMRC, the number of residential property transactions was 2.5 per cent lower in December than in the previous month and 3.9 per cent lower compared to December 2016. The HMRC figures were not seasonally adjusted and are subject to revision.
The UK Finance data also pointed to a slowdown in con- sumer credit growth during December.
The outstanding value of consumer debt was 0.7 per cent higher than a year earlier, down from an annual growth rate of 0.8 per cent during November, according to the figures. They also showed that consumers borrowed more on credit cards in December compared to the same month the previous year, while outstanding personal loans and overdraft balances both fell on the same basis.
"The Bank of England will be pleased with the slowdown in consumer credit in December and will be looking for a continuation of this trend in 2018," said Howard Archer, chief economic adviser to the EY ITEM club.
The BoE has warned that rapidly growing consumer credit has helped to create a "pocket of risk" in the financial system. Mr Archer said higher interest rates may have pushed some consumers to be more cautious. "However, the persistent squeeze on consumer purchasing power is likely continuing to fuel the need for some consumers to borrow," he said.