UK house purchases slow to nine-month low as consumer credit growth moderates

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Home Ownership Falls To Its Lowest Level In 30 Years
The number of mortgage approvals for purchases fell in June (Source: Getty)

The number of house purchases fell to a nine-month low in June as the pace of consumer lending moderated, new lending data today revealed.

The number of mortgage approvals fell to its lowest since September last year, according to the Bank of England, in the latest sign the housing market may be entering a period of moderation.

There were 64,684 mortgage approvals for house purchases in June, with £11.8bn in loans extended.

The number of house purchases has fallen in every month since peaking in January, a trend which could start to drag down house prices after a period of sustained growth which has reduced affordability.

Read more: Every London borough ranked by house price reductions

The number of mortgage approvals held up in the immediate aftermath of the Brexit vote after a short-lived dip, but since then the feed-through of the devaluation of sterling since the EU referendum in June last year has put pressure on consumers' spending power.

Howard Archer, chief economic advisor to the EY Item Club, said: “The fundamentals for house buyers are likely to remain weak over the coming months with consumers’ purchasing power continuing to be squeezed by inflation running higher than earnings growth.

He added: “Additionally, housing market activity is likely to be hampered by soft consumer confidence and limited willingness to engage in major transactions.”

Meanwhile, £1.5bn in non-home loans were extended to consumers in June, meaning the annual growth rate in consumer credit fell to 10 per cent for the first time since May last year.

Borrowing via credit cards grew slightly month-on-month, but this was balanced by a sharp fall in loans and advances from £1.3bn in May to £0.9bn in June.

The downward trend in the growth rate is likely to be welcomed by the Bank. It has been keen to try to rein in the growth in lending to consumers, with fears that some “pockets of risk” are growing in the UK economy which could harm financial system stability.

Although consumer lending is dwarfed by lending for property, it accounts for a disproportionate amount of bank losses. Consumer lending has far outstripped wage growth over the past year, which reached only 1.8 per cent in the year to May, according to the Office for National Statistics.

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