UK Mortgage Lending At 8-Month High

(RTTNews) - UK mortgage lending increased to the highest since last September and mortgage approvals rose unexpectedly in May despite the squeeze on real income from rising inflation and interest rates, official data showed on Friday.

Mortgage lending increased to GBP 7.4 billion in May from GBP 4.2 billion in April, the Bank of England said. This was the highest since September 2021.

At the same time, approvals for house purchases ticked up to 66,200 in May from 66,100 in April. Approvals were forecast to fall to 64,000.

The effective rate on new mortgages rose by 13 basis points to 1.95 percent in May, the highest since June 2021.

However, data released by the Nationwide Building Society this week suggested a slight slowdown in housing market activity. House price inflation eased to a six-month low of 10.7 percent in June.

The BoE had raised its benchmark rate over the last five consecutive meetings to curb inflation amid the labor market tightness.

As interest rates rise further and the pressures of the cost-of-living crisis take their toll on borrowers, the slowdown will continue and transactions will slow abruptly over the next 12 months, Capital Economics economist Andrew Burrell said.

Individuals borrowed an additional GBP 0.8 billion in consumer credit in May, following GBP 1.4 billion of borrowing in April, BoE data showed. Annual growth in consumer credit held steady at 5.7 percent in May, the strongest rate since February 2020.

Borrowing by large businesses grew at a slower pace of 6.5 percent in May, following a 7.0 percent rise in April. At the same time, the annual growth rate of borrowing by SMEs rose to -4.9 percent from -5.3 percent, data showed.