UK borrowing, mortgage approvals rise in May

Mortgage approvals and consumer borrowing rose in May, according to the latest data from the Bank of England.

Mortgage approvals in the UK ticked up to 65,202 from 65,051, beating analysts' expectations of 64,000 but coming in below the average for the last six months. Meanwhile, approvals for re-mortgaging advanced to 42,955 from 40,437 the month before and net mortgage lending increased to £3.5bn from a 12-month low of £2.7bn in April.

Annual growth in consumer credit remained strong at 10.3% in May. It was up £1.7bn on the month, marking its biggest jump since November 2016, beating expectations for a £1.4bn increase and above the six-month average of £1.5bn.

Credit card borrowing grew 9.1% on an annual basis in May.

Jonathan Harris, director of mortgage broker Anderson Harris, said: "While there is likely to be considerable uncertainty ahead as a result of the ongoing Brexit negotiations, the mortgage market appears to be shrugging these off and steadily ticking along.

"Approvals for house purchase are broadly stable although re-mortgaging continues to rise as borrowers take advantage of cheap fixed-rate mortgages in particular. However, with a reported third of all borrowers sat on their lender’s standard variable rate, there are still too many borrowers paying more than they need to. As speculation continues regarding the possibility of an interest rate rise, it may be that more borrowers are persuaded to take the plunge and secure a cheap deal before they miss out."

Howard Archer, chief economic advisor to the EY Item Club, said: "It may be that the heightened squeeze on consumer purchasing power is increasing the need for some consumers to borrow.

“The Bank of England will be far from happy with the May consumer credit data, and it could bolster the case for a near-term interest rate hike to try to curb consumers’ readiness to borrow. While any interest rate hike would be small with further increases some way off, even small increases could cause problems for some consumers given high borrowing levels."