Number of mortgage approvals for home-buyers falls to five-month low

The number of mortgage approvals being made to home-buyers fell back in August from an 18-month high seen the previous month, Bank of England figures show.

Some 65,545 mortgage approvals were made for house purchase in August, down from 67,011 in July, the Bank’s Money and Credit report said.

July had seen the highest monthly total for house purchase mortgage approvals since the start of 2018, but August’s figure was the lowest since March this year.

Despite the weakened numbers, the Bank said mortgage approvals remained within the narrow range seen over the past three years.

Meanwhile, the annual growth rate in consumer credit, which includes borrowing using credit cards, personal loans and overdrafts, slowed in August to 5.4% – the weakest reading since early 2014.

The report said: “This remains considerably lower than its peak of 10.9% in November 2016.”

The extra amount borrowed on credit cards weakened in August to the lowest levels seen since December last year, the Bank said.

Howard Archer, chief economic adviser at EY Item Club said: “It is possible that housing market activity may have got a recent modest lift from house-buyers looking to get their move sorted out before Brexit is due to occur on October 31 given the major uncertainties as to what exactly will happen then.”

He continued: “However, the fact that mortgage approvals fell back to a five-month low in August suggests that the upside for housing market activity currently remains limited amid major uncertainties.”

Andrew Montlake, managing director of mortgage broker Coreco, said he expected to see mortgage approval numbers become more robust in the coming months “as mortgage inquiries for home purchase really picked up in September”.

He said: “Mortgage approvals for house purchase in August were down on July but held up fairly well once you factor in the seasonal drop-off.

“Three years of delay and indecision have created a phenomenal amount of pent-up demand.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the current 5.4% year-over-year growth rate in the stock of unsecured credit looks sustainable, given that the ratio of unsecured debt to incomes is still below its mid-2000s peak, while borrowing costs are very low.

“Continued robust growth in households’ spending, therefore, should ensure the economy does not come close to a recession,” he said.

He added that the fall in mortgage approvals “looks like a mere blip away from an improving trend”.

“Despite their dip, approvals still matched their 12-month average in August and they look set to pick up again over the coming months, given that surveys show new buyer demand is strengthening.

“A further fall in mortgage rates – lenders so far have passed on only a fraction of this year’s fall in their funding costs – also should help to boost demand.”