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UK mortgage approvals fall unexpectedly in May

Published 29/06/2015, 10:51
© Reuters. Workers are seen on a construction site in London

LONDON, June 29 (Reuters) - British mortgage approvals fell unexpectedly in May, Bank of England data showed on Monday, countering other recent signs that activity in the housing market has picked up in recent months.

The BoE figures also showed growth of lending to consumers eased back in May alone, but was still strong.

On a three-month annualised basis, consumer credit rose at the fastest pace in almost 10 years, underscoring the reliance of Britain's economic recovery on household spending.

Mortgage approvals for house purchases numbered 64,434 in May from 67,580 in April. Analysts in a Reuters poll had forecast 68,700 mortgage approvals were made in May.

Tighter rules on mortgage lending took effect last year, requiring banks and building societies to make more rigorous checks on whether borrowers can afford their loans.

The number of approvals fell throughout most of 2014, cooling house price growth and easing concerns about a bubble in the housing market.

Monday's data aside, there have been signs that the housing market is heating up again. Mortgage approvals have risen in four of the last six months and the pace of price rises has picked up.

Britain's biggest housebuilder Barratt said uncertainty in the run-up to the May national election, during which no major party was expected to achieve an overall majority, had no discernible effect on demand.

Net mortgage lending, which lags approvals, rose 2.098 billion pounds in May, the biggest increase since November, the BoE said, slightly more than a forecast of 2.05 in the Reuters poll.

The BoE said consumer credit grew by 1.0 billion pounds in May, down from 1.176 billion pounds in April. Economists had expected an increase of 1.1 billion pounds.

Despite May's slowdown, consumer credit on a three-month annualised basis rose 8.5 percent, the highest since August 2005.

Even though wages have risen only weakly for much of the past five years, Britain's economic recovery is still heavily reliant on spending by households.

© Reuters. Workers are seen on a construction site in London

The BoE said lending to non-financial businesses rose by 713 million pounds, recovering only around half of April's 1.473 billion pound dip.

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