UK Mortgage Approvals At 28-Month Low

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UK mortgage approvals declined to a 28-month low in October as rising interest rates started to hurt housing market activity, official data revealed on Tuesday.

Approvals for house purchases, an indicator of future borrowing, declined more-than-expected to 58,977 in October from 65,967 in September, the Bank of England data showed. The expected level was 60,200 and reached the lowest since June 2020.

Secured lending decreased to GBP 3.96 billion in October from GBP 5.87 billion in the previous month. This was the lowest since November 2021.

The ‘effective’ interest rate, the actual interest rate paid on newly drawn mortgages, increased by 25 basis points, to 3.09 percent in October.

The BoE has been tightening its monetary policy since last December to fight stubbornly high inflation. The bank last hiked its rate in November by a 75 basis point, which was the biggest increase in 33 years.

Today’s data showed that consumers borrowed GBP 0.8 billion in consumer credit, well above the GBP 0.6 billion borrowed in September but below economists’ forecast of GBP 0.9 billion.

The additional GBP 0.8 billion consumer credit borrowing was split equally between GBP 0.4 billion on credit cards, and GBP 0.4 billion through other forms of consumer credit.

The annual growth in consumer credit growth eased slightly to 7.0 percent from 7.1 percent in September.

Further, data showed that UK businesses repaid GBP 7.3 billion of loans in October compared to GBP 3.0 billion of net borrowing in September. This was the highest level of net repayments from non-financial businesses since June 2020.

M4 money supply expanded 4.8 percent annually in October, slower than the 5.4 percent rise in September. On a monthly basis, M4 remained flat.

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