UK Mortgage Approvals Rise From Record Low

UK mortgage approvals increased sharply in June as the housing market reopened after the relaxation of restrictions to curb the spread of the coronavirus, data from the Bank of England showed Wednesday.

The number of mortgages approved in June rose to a three-month high of 40,000 in June from a record low 9,300 in May. Approvals were expected to rise to 33,900. However, the latest figure was below February’s pre-Covid level of 73,700.

Lending to individuals increased GBP 1.8 billion in June in contrast to a fall of GBP 3.3 billion in May. On a yearly basis, lending grew 2.1 percent.

Households borrowed an additional GBP 1.9 billion secured on their homes. This was higher than the GBP1.3 billion in May.

House purchase mortgage approvals saw a strong initial recovery in June, Hansen Lu, an economist at Capital Economics, said. Lending is likely to strengthen further this year, as the stamp duty cut supports demand and lenders bring back higher LTV loans, he noted.

All this supports the assessment that the risk of a house price collapse has now diminished significantly, the economist added.

Data showed that household’s consumer credit borrowing recovered a little in June, following three particularly weak months. Consumer credit was down GBP 0.1 billion.

The weakness in consumer credit net flows in recent months meant that the annual growth rate was -3.6 percent, the weakest since the series began in 1994, the BoE said.

Further, the monthly growth in the M4 money supply slowed to 1 percent in June from 2.1 percent in May. Year-on-year, M4 advanced 13.1 percent in June.

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