UK mortgage approvals decline for second month
By Oliver Haill
Date: Thursday 04 May 2017
(ShareCast News) - UK banks are continuing to approve fewer mortgages, with loans for house purchases falling more than expected to a six-month low.
The Bank of England on Thursday reported mortgage approvals in March had eased for a second month in a row, falling to 66,837 from the previous month's 67,936, when the consensus forecast had been for a slight drop to 67,200.
This represented a drop of 1.6% compared to the previous month, or a fall of 4.7% on an annual basis.
Economists said the data added to the evidence that the housing market is being increasingly affected by the squeeze on consumers from growing inflation and flat wages.
"We suspect markedly weakening consumer fundamentals, likely mounting caution over making major spending decisions, and elevated house price to earnings ratios will weigh down further on housing market activity and house prices over the coming months," said economist Howard Archer at IHS Markit.
However, he added that the shortage of housing supply was likely to put a floor under prices.
Offering a more optimistic take, Hansen Lu at Capital Economics said that the economic backdrop was supportive for more than just house prices, expecting lending to also gradually recover over the rest of 2017.
"Various factors have put downward pressure on housing market activity over the last few months. For example, the first stage in
the reduction of mortgage interest tax relief for buy-to-let came in April, and this is likely to have kept investor demand subdued. And the fact that house prices are so high may be constraining the pool of potential buyers," Lu added.
Mark Harris at mortgage broker SPF, said the fall was just a "very slight dip" and said it suggested the market was continuing to tick along thanks to rock-bottom interest rates.
"With HSBC launching the cheapest five-year fix on the market at 1.69% yesterday and Yorkshire Building Society introducing a record low two-year discounted rate at just 0.89%, the market is more competitive than ever," he said, although noting that affordability criteria remains tight.
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