UK mortgage approvals and consumer credit growth slow

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The UK’s high street banks approved fewer new residential mortgages than expected in March, while consumer credit growth slowed, in the latest signs of slowdown in the country’s housing and retail markets.

Over the month, 41,061 new loans for house purchase were approved, according to the British Bankers’ Association, a 2.8 per cent decline compared to February and below consensus forecasts of 42,000.

The data marked a second successive month of falls, though the figures were still only slightly below the monthly average of 41,600 over the previous six months.

Although a supply shortage has helped support companies building new houses, there have been increasingly clear signs of a slowdown in the wider housing market in recent weeks. Yesterday Countrywide – which operates Britain’s largest network of residential estate agents – said it had seen a “continuation of the declining market trends” since the start of the year, and Nationwide’s latest survey of house prices released today showed the sharpest monthly decline in prices since 2012.

In light of the disappointing data, IHS Markit cut its forecast for average house price gains over the year to 2 per cent, and said the final figure could be even lower. Howard Archer, IHS Markit chief UK and European economist, said:

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.

Unsecured consumer borrowing, meanwhile, continued to grow in March according to the BBA’s figures, but the rate of increase slowed to 6.1 per cent from 6.5 per cent in February. Growth in credit card borrowing was particularly slow, at 5.2 per cent.

Eric Leenders, BBA managing director for retail banking pointed to recent signs of a wider decline in retail spending, noting that “price rises appear to have started biting into consumers’ spending”.

The BBA’s figures only cover data from seven big high street banks – Lloyds, Santander, TSB, Barclays, HSBS, RBS and Virgin Money – but they follow data from the Bank of England released earlier this month which showed a slowdown in consumer credit availability in the first quarter.

Slowing consumer spending is is bad news for the UK’s wider growth prospects, as confident consumers were key to propping up the country’s growth rate last year. Official figures released this morning have already shown a broad slowdown in economic growth at the start of the year.

Photo: Bloomberg

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