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REPEAT: UPDATE: UK Mortgage Approvals At 4-Month High

July 29, 2014

LONDON (Alliance News) - UK mortgage approvals increased more-than-expected to a 4-month high in June, recovering from a temporary slowdown caused by mortgage lending regulations.

After four months of decline, approvals for house purchases increased to 67,196 in June from 62,007 in May, the Bank of England data showed Tuesday. It was forecast to rise to 63,000. The latest figure was the highest since February.

The International Monetary Fund on Monday advised the UK to tighten its monetary policy if new regulations introduced to contain overheating in the housing market prove ineffective.

The Bank of England may need to consider raising interest rates in case macroprudential measures prove insufficient to deal with financial stability risks from the housing market, the Washington-based lender said.

Drawing attention to the risks of a prolonged period of record low interest rates, BoE Chief Mark Carney last week said the biggest risks are linked to the housing market.

Today's data suggests that Mortgage Market Review, introduced in April had a temporary effect on the property market.

According to British Bankers' Association, loans approved for house purchases increased to a 3-month high of 43,265 in June from revised 41,881 in May.

Mortgage lending is likely to rise at a slow but steady pace over the rest of the year, said Matthew Pointon, a property economist at Capital Economics. In turn, that is consistent with further gains in house prices, although at a slower pace than that seen over the past 12 months, he added.

Total lending to individuals increased GBP 2.5 billion from May, BoE reported. Within the total, lending secured on dwellings climbed at a slower pace of GBP 2.1 billion in June, after rising GBP 2.3 billion in May. On a yearly basis, secured lending grew 1.5%.

At the same time, consumer credit grew only GBP 0.4 billion after rising GBP 0.7 billion. Annually, growth remained unchanged at 5.3% in June. On the other hand, lending to businesses decreased by GBP 3.4 billion, in contrast to last month's GBP 2.3 billion increase.

IHS Global Insight's Chief UK Economist Howard Archer said the renewed, sharp fall in net lending to businesses looks both disappointing and worrying as it is vitally important for sustained and balanced UK growth.

Despite the overall sharp drop in net lending in June, net lending to small and medium-sized enterprises rose by GBP 235 million.

The monetary aggregate M4 rose 0.1% in June from May when it fell by 0.1%. On a yearly basis, M4 was down 0.6% versus a 0.8% drop a month ago.

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Source: Alliance News

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