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UK mortgage approvals unexpectedly fell in November, while consumer credit growth dropped to its weakest level in two years in a sign households are being cautious with their finances after the Budget.
Net mortgage approvals — approvals net of cancellations — for house purchases declined by 2,400 to 65,700 in November, data from the Bank of England showed on Friday.
That was well below the increase to 68,500 forecast by economists polled by Reuters.
BoE data also showed a £0.9bn rise in consumer credit in November, which is lower than October’s rise of £1.0bn and the average gain of £1.2bn over the previous six months.
The annual growth rate for all consumer credit decreased to a 29-month low of 6.6 per cent in November, from 7.3 per cent in October.
The figures suggested “that households’ caution with their borrowing and saving ahead of the Budget hasn’t gone away”. said Elias Hilmer, economist at the Capital Economics consultancy.
The BoE’s data added to the risk of an economic contraction in the final quarter of 2024, he cautioned. The economy stagnated in the three months to September and contracted in October.
However, Elliott Jordan-Doak, economist at the Pantheon Macroeconomics consultancy, said the figures “represented a return towards more normal levels of activity after a number of sharp pre-Budget moves in the October data”.
Mortgage approvals fell sharply over 2022 and remained historically low in 2023 as rising borrowing rates hit prospective buyers, but increased by 13,000 in 2024 as costs declined.
Charles Yuille, managing director at the broker Willow Brook Mortgages, said: “November was an average month, possibly due to the Autumn Budget taking the steam out of the market and hitting sentiment. Mortgage rates also edged up slightly, which may have dampened demand.”
However, he added that “demand was still there due to the approaching stamp duty deadline and December, perhaps surprisingly, was one of our busiest months of the year”.
Chancellor Rachel Reeves confirmed in the Budget that a temporary stamp duty holiday would end in March. From April, first-time buyers will start paying the levy for properties worth £300,000 or more, instead of £425,000 currently.
Tomer Aboody, director of specialist lender MT Finance, said that further interest rate cuts, which are expected this year, “should help boost those [mortgage approval] numbers and get them back on track”.
The bank reported that the “effective” interest rate — the actual interest paid — on newly drawn mortgages decreased by 11 basis points, to 4.5 per cent in November, the lowest since April 2023.
However, the rate on the outstanding stock of mortgages increased to 3.8 per cent in November, the highest since the series began in 2016, reflecting the rise in borrowing costs since 2021.
On Thursday, data from the mortgage provider Nationwide showed that UK house prices rose at an annual rate of 4.7 per cent in December, the fastest annual pace since October 2022.
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