UK net approvals for house purchases fell to 54,900 in August from 55,900 in July. The August count was also below the roughly 60,100 average for the preceding six months. Because approvals precede many completed loans, the decline offers an early view of weaker mortgage demand rather than a count of homes actually bought.
Economics & Markets··Evening
Purchase approvals fall below the recent average
The Bank of England counted 54,900 net mortgage approvals for house purchases in August, down from 55,900 in July. Trading Economics also reported the fall to 54,900. The August count was below the preceding six months’ average of about 60,100. Net approvals subtract cancellations and tend to precede the actual drawing of many loans, so this is an early indicator of borrowing demand rather than a count of homes sold. Approvals for switching a mortgage to another lender also slipped, from 34,600 to 34,000.[1], [2]
Actual mortgage borrowing moves differently
Households’ net mortgage borrowing rose to 4.4 billion pounds in August from 4.1 billion pounds in July, despite the lower number of purchase approvals. It remained below the previous six months’ 5.2 billion pounds average. Gross secured lending fell from 25.3 billion pounds to 23.6 billion pounds, while repayments also declined from 21.1 billion pounds to 20.4 billion pounds. The bank notes that gross lending minus repayments does not exactly reproduce the net-borrowing series because the figures use different seasonal adjustments. The approval and lending series therefore answer different questions about the housing market.[1]
Newly drawn loans carry a higher rate
The effective rate paid on newly drawn mortgages rose from 4.45% to 4.60% in August. The average rate on the outstanding mortgage stock edged up from 3.97% to 4.00%. Meanwhile, monthly net consumer credit borrowing increased from 2.1 billion pounds to 2.5 billion pounds, above its six-month average of 1.9 billion pounds. Credit-card borrowing accounted for 1.2 billion pounds of that August total, up from 0.9 in July. These figures accompany the mortgage approval release but measure borrowing costs and unsecured credit rather than additional purchase approvals.[1]
