UK Mortgage Approvals Fall Unexpectedly, Consumer Credit Growth Weakest Since 2022

(RTTNews) - UK mortgage approvals declined unexpectedly to a three-month low in November and consumer credit growth weakened to the lowest in more than two years, vindicating the view that the economy likely stagnated at the end of the year.

The number of approvals fell to 65,720 in November from 68,129 in the previous month, data from the Bank of England showed on Friday. Approvals were expected to rise to 69,000.

Nonetheless, approvals remained above their previous twelve-month average of 60,400.

The effective interest rate, which is the actual interest paid on newly drawn mortgages, dropped 11 basis points to 4.50 percent. The rate marked the lowest since April 2023.

Meanwhile, mortgage lending declined by GBP 1.0 billion to GBP 2.5 billion in November. This follows an increase of GBP 1.0 billion in October.

Annual growth in consumer credit eased to the lowest since June 2022. Consumer credit posted an increase of 6.6 percent compared to 7.3 percent in October. Consumer credit decreased marginally to GBP 0.9 billion in November from GBP 1.0 billion a month ago.

Data showed that households' deposits with banks and building societies increased by GBP 0.2 billion in November. At the same time, borrowings of businesses from banks increased to GBP 6.0 billion. According to the latest report from the Nationwide Building Society, house prices grew at a faster pace of 4.7 percent in December and ended the year on a strong footing.

Nationwide Chief Economist Robert Gardner noted that the upcoming changes to stamp duty will generate volatility as buyers will bring forward their purchases to avoid higher tax. However, he said the underlying pace of housing market activity will continue to strengthen gradually.

In December, the BoE had left its interest rate unchanged and policymakers called for a gradual approach to the withdrawal of policy restrictiveness. Bank staff projected the economy to post zero growth in the fourth quarter compared to 0.3 percent estimated in November.