UK mortgage approvals drop to 18-month low in July

Britons looking to buy a home displayed more caution in the month following the Brexit vote, although lending to businesses held up well.

Total lending to individuals grew by 0.3% month-on-month or £3.8bn to hit £1,496.4bn, the Bank of England said. That was less than the average £5.1bn observed over the previous six months.

Of that, lending secured on dwellings advanced 0.2% month-on-month or £2.7bn (consensus: £3.1bn) to £1,309.8bn.

In parallel, the number of mortgage approvals declined from 64,152 in June to 60,912 in July (consensus: 62,000) - an 18-month low.

During the first quarter of 2016, mortgage approvals totalled 216,575, their best tally since the fourth quarter of 2007, economists at IHS Markit pointed out.

"July’s marked slowdown in mortgage approvals fuels our belief that house prices could ease back by around 3% over the latter months of 2016 and there could well be a further 5% drop in 2017," forecast IHS Markit´s chief European+UK economist Howard Archer.

To back up his estimate, Dr.Archer referenced the most recent figures from the Royal Institute of Chartered Surveyors showing that buyer inquiries fell for a four-month running to in July and in a marked fashion.

Consumer credit meanwhile increased by £1.2bn or 0.6% month-on-month, down from the £1.9bn pace observed in the previous month.

On a brighter note, net lending to non-financial businesses hit £2.2bn in July, after an increase of £1.1bn in June.

Net lending to small and medium enterprises picked-up to £610m - a five-month high - versus £508m in June.

Nevertherless, in parallel net lending to non-financial companies via capital markets slowed from £2.5bn in June to £0.3bn in July, as firms issued less commercial paper and loans from so-called MFIs shrank.

"The Bank of England will be pleased to see solid bank lending to businesses in July. There is serious concern that businesses will rein back their activities, especially investment, due to heightened uncertainty in the aftermath of the Brexit vote [...] although much will also depend on the demand for loans," Dr. Archer said.