Mortgage approvals at six month low - Bank of England

Mortgage approvals fell to a six-month low in August, official data showed on Friday, as higher interest rates continued to weigh on lending.

According to the latest Money and Credit report from the Bank of England, net mortgage approvals for house purchases - an indicator of future borrowing - fell to 45,400 from 49,500 in July. Analysts had been expecting a smaller drop, to around 47,400.

Net approvals for remortgaging also fell, to 25,000, the lowest level since July 2012.

The effective interest rate - the actual interest paid - on newly-drawn mortgages increased by 16 basis points to 4.82%.

The monthly report also showed that individuals borrowed, on net, an additional £1.6bn in consumer credit in August, up from £1.3bn in July. The increase was driven by other forms of consumer credit, such as car dealership finance and personal loads, rather than credit cards, which reported an increase of £0.7bn during the period.

Households also withdrew £0.3bn from banks and building societies, net, during the month, reversing two months of net deposit inflows. Total liquid assets - which include National Savings and Investment accounts as well as banks and building societies - were unchanged.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The renewed rise in mortgage rates has weighed on net mortgage lending, which was a mere £1.2bn in August, down from an average of £5.1bn in 2022. This primarily reflects the decline in gross mortgage lending. Repayments have also fallen, but this is largely due to the decline in housing transactions and hence fewer mortgages being fully repaid.

"In real terms, households’ liquid assets are almost back to their 2019 level and are below the level implied by their pre-Covid trend, which was upward sloping due to population growth and ageing. As a result, households might collectively seek to rebuild their savings buffer over the next year."