In February, mortgage approval dropped 1.2% to 63.315 from 69,114 in January, which the latest glimpse of lending from the Bank showed. This was a lot lower than expected, and was the first fall since August, supporting a number of reports about the slowdown in the mortgage market.
The chief UK economist at HIS Markit, Howard Archer, said that it could be a sign that many are fearful of the economy, and were weighing up their willingness to go through with a property purchase.
He said: “The February slowdown in mortgage approvals reported by the Bank of England fuels our suspicion that housing market activity and prices will come under increasing pressure over the coming months from weakening fundamentals.”
It seems that weaker mortgage demand could lead to house price growth easing, with the slowdown expected to be limited by the shortage of homes coming on the market. Archer has forecasted a rise of 3% or less, following a 4.5% increase in house prices in 2016.
In February, consumer credit rose by £1.4bn, at a slower rate than January’s £1.6bn rise, but the annual growth has remained the same at 10.5%.
Even though inflation is rising, people do not seem to be put off, as the annual growth in credit card lending rose to an 11-year high of 9.3% in February.
Alan Clarke, the Scotiabank economist said that people were willing to dip into their savings and borrow even more on credit cards in order to maintain their spending levels. He said:
“The figures fit with the idea that people will borrow to maintain their spending. People have to rely more now on credit cards because it’s so easy to get hold of that debt and more difficult to withdraw equity from mortgages.”
In March, the Bank said that rapid growth in consumer credit is underpinned by debt and particularly credit cards, meaning this is one of the main threats in UK banking systems.
“Concerns have been raised about the recent rapid growth in consumer credit and February’s numbers are unlikely to do much to allay them,” said Martin Beck, senior economic adviser to the EY Item Club forecasting group.
“However with real incomes under pressure from rising inflation, that households remain able and willing to borrow for spending may prove to be a blessing in disguise as far as the all-important consumer sector is concerned.”
If you aren’t ready to buy a house yet but are looking to fly the nest or have more space, we have a wide range of properties for rent in Barnstaple which are perfect for long or short-term let.