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Financial News: UK Mortgage Approvals Drop Slightly

UK Mortgage Approvals Drop Slightly

05/31/2024 - 06:50:00 (RTTNews)

(RTTNews) - UK mortgage approvals decreased marginally in April and households made record deposits in individual savings accounts or ISAs to take advantage of higher interest rates, data released by the Bank of England showed on Friday. The number of mortgage approvals dropped to 61,100 from 61,300 in March. Approvals were forecast to rise to 61,500.

Data showed that the effective interest rate on newly drawn mortgages climbed slightly by a basis point to 4.74 percent in April.

Mortgage lending increased to GBP 2.4 billion in April, while it was seen unchanged at GBP 0.5 billion.

The annual growth for net mortgage lending was 0.2 percent, in contrast to the 0.1 percent fall in March. This was the first annual increase since October 2022.

Gross lending rose slightly to GBP 20.6 billion from GBP 20.5 billion in March, its highest level since January 2023.

Net consumer credit borrowings halved to GBP 0.7 billion from GBP 1.4 billion a month ago. The expected level was GBP 1.5 billion. The fall reflects lower net borrowing through credit cards and through other forms of consumer credit.

Businesses repaid GBP 1.1 billion of loans to banks and building societies, slightly up from GBP 0.9 billion in March. Borrowing by large businesses decreased 0.3 percent and lending to SMEs slid 4.6 percent annually in April.

Further, data showed that households' holdings of money increased GBP 8.4 billion in April, the highest flow since September 2022.

Households deposited an additional GBP 11.7 billion into tax free ISAs, the highest on record.

Capital Economics' economist Ashley Webb said money and lending figures indicate that the recent rebound in the housing market is cooling and households reined in their spending in April.

However, the economist still think interest rate cuts starting in the summer and further falls in inflation will mean the economic recovery this year will be stronger than most expect.

In May, the <a href=https://www.rttnews.com/3446740/bank-of-england-moves-closer-to-rate-cut.aspx target=_blank >BoE</a> had kept its interest rate unchanged for the sixth straight meeting at 5.25 percent, which was the highest since early 2008. The bank also signaled that the first rate cut since 2020 is on the horizon.

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