House purchase slowdown continued in May as real income squeeze builds

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The number of mortgage approvals for purchases fell in May compared to the previous year (Source: Getty)

The number of house purchases fell in May ahead of the General Election, new figures show.

House purchase numbers by high street banks were 3.3 per cent lower than May 2016, with 40,347 approved, according to the British Bankers’ Association (BBA).

Remortgaging approval numbers were 10 per cent lower in May than the same month a year earlier. They were also down on the six-month average remortgaging trend.

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The numbers suggest the Bank of England's own lending figures may show a further dip in mortgage approvals in its less timely but more comprehesive data at the end of the month.

House purchases and remortgages have both slowed since the start of the year. There had been steady growth over the second half of 2016 as buyers and owners looked to lock in interest rates at historical lows.

However, more recently an income squeeze from rising prices may be weighing on demand for homes, while there have also been signs the Bank of England is considering raising interest rates, increasing bank borrowing costs.

Inflation has recently overtaken wage growth, squeezing the real incomes of potential home-buyers.

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The growth in consumer credit also slowed slightly during the month, in a further sign consumers may be starting to tighten their belts.

Consumer credit grew by 5.1 per cent in May, a slowdown from the 6.4 per cent growth in the previous month, the BBA said.

Eric Leenders, BBA managing director for retail banking said: “This month’s figures show that in the run up to the General Election, credit growth in personal loans, cards and overdrafts has slowed, which was reflected in lower spending; with increased household costs affecting growth in deposits and saving."

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