Mortgage approvals down in November

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Published: Friday 2nd January 2015 by The News Editor

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The number of mortgage approvals made to home buyers fell to its lowest levels in almost a year-and-a-half in November, the Bank of England has reported.

Some 59,029 approvals for home loans with a collective value of £9.6 billion were recorded for house purchase, marking the lowest monthly total seen since June 2013.

Meanwhile consumer credit, which is made up of people’s borrowing on credit cards, loans and overdrafts, saw its strongest increase since early 2008 in the run-up to Christmas as shoppers took advantage of stores’ promotions.

Consumer credit increased by £1.3 billion in November, which is higher than the average monthly increase of £1 billion seen over the previous six months and the largest upswing seen since a £1.4 billion increase in February 2008.

Howard Archer, chief UK and European economist at IHS Global Insight, said the surge in consumers snapping up items on Black Friday “likely contributed to the high borrowing levels”.

Within consumer credit, credit card lending increased by £269 million in November, which is above the typical £200 million monthly uplift seen in recent months.

Personal loan and overdraft borrowing jumped by £983 million, which was also higher than the recent average monthly increase of £700 million.

The figures, contained in the Bank’s Money and Credit report, echo findings from the British Bankers’ Association (BBA) which were released last month.

The BBA found that the number of mortgage approvals made to home buyers slid by a fifth in November compared with the same month last year as a “sharp chill” set into the housing market.

It also said that annual growth in consumer borrowing using credit cards, overdrafts and personal loans continued to grow at the fastest rate seen in six years, reflecting an easier borrowing climate and improved household finances.

Several experts have said that they do not expect the slide in housing market activity seen in recent months to last for long.

In December, the Government announced a complete overhaul of stamp duty, a move which is expected to prompt a fresh uplift in activity early this year as more people are encouraged to buy and sell homes.

The overhaul has ended the much-criticised “slab” structure of the duty in favour of a graduated version of the tax. Under the new system, a home buyer will only pay the rate of tax on the part of the property price that falls within each tax band, in a similar way to income tax.

Dr Archer said: “The Bank of England data provide ongoing evidence that the housing market ended 2014 on the back foot.”

He continued: “We do expect some pick up in housing market activity in 2015 from the current lows, although we expect the increase in activity to be relatively limited thereby keeping a lid on house prices increases.

“Specifically, on the assumption that there will be some pick-up in housing market activity during 2015 from current lows, we expect house prices to rise by a solid but unspectacular 5% this year.”

Published: Friday 2nd January 2015 by The News Editor

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