Mortgages cool fears of bubbles and surprise hike
LENDING in the UK economy contracted slightly in August as the number of mortgage approvals declined.
It signals that the housing market may continue to cool off from its summer highs, which would be consistent with surveys published earlier in the month such as the Halifax house price index.
The data released by the Bank of England showed the number of approvals for house purchase declined by 1,888 in August to 64,212. Mortgage lending values fell by £300m to £10.4bn.
However, lending by banks in general declined which included lending to companies and non-mortgage lending to households.
Credit expansion in the UK has been remarkably sluggish over the last year given the rate of economic growth has been over three per cent. Its growth in August of 1.0 per cent means growth has been above 1 per cent for three months, the first time this has happened since early 2011.
“August’s household borrowing figures provided further evidence that the recovery is not being driven by an unsustainable credit binge. And while mortgage lending should pick up as the economic backdrop improves, only a gradual revival seems likely,” said Maeve Johnston, economist at Capital Economics.
The slow rate of growth in credit should ease fears of financial bubbles and reduce the likelihood of a suprise early rate hike.