Bank of England figures confirmed yesterday that mortgage approvals dropped to an 11-month low in May, even as the actual amount of lending secured against property rose to the highest level since mid-2008.
There were 61,707 applications approved during the month, a drop of more than 1,000 from April and down from the 75,901 in January, a recent peak.
The total amount of outstanding mortgage debt rose to £1.284 trillion, and the number of approvals for remortgage lending dropped to 29,240, the lowest in 15 months.
Lending growth of £2bn during the month rose in May, up from April’s £1.75bn increase and the most rapid acceleration in nearly six years. But the figure is far below previous record levels – mortgage lending accelerated by £10.36bn during October 2006.
“Expanding by £2bn marks a continued steady increase but is still just a fifth of the rate that prevailed in 2007 pre-crisis. In this context, the financial policy committee’s interventions last week look pre-emptive,” said Sam Hill, senior UK economist at RBC Capital Markets.
He added: “Arguably, the 6.5 per cent quarter-on-quarter annualised growth rate in consumer credit is deserving of more attention.”
There is now £160.6bn outstanding in unsecured consumer credit, up from £156.4bn in the same month last year.
There was an encouraging jump in lending to businesses, which rose by £3.4bn in May, the first rise in more than half a year and the largest in at least three years, dating back to the beginning of the survey in 2011. Over the previous half a year, lending has dropped by an average of £2.1bn every month.
“While a welcome development, It remains to be seen if May’s marked increase in lending to businesses is the start of an improving trend. There have been false dawns before,” said Howard Archer, chief economist at IHS Global Insight.