UK mortgages hit 13-year high but consumers curb other borrowing – Metro US

UK mortgages hit 13-year high but consumers curb other borrowing

FILE PHOTO: Outbreak of the coronavirus disease (COVID-19) in Hale
FILE PHOTO: Outbreak of the coronavirus disease (COVID-19) in Hale

LONDON (Reuters) – British mortgage approvals hit their highest in almost 13 years in August, underscoring the scale of the post-lockdown bounce-back in the housing market, but consumers turned more cautious about day-to-day borrowing, Bank of England data showed.

Boosted by a tax cut for home-buyers and a surge in demand for more spacious homes after the lockdown, mortgage approvals jumped to 84,715 from 66,288 in July, their highest level since October 2007, just before the global financial crisis.

Economists polled by Reuters had expected Tuesday’s figures to show about 71,000 approvals.

Mortgage lending rose by a weaker-than-expected 3.1 billion pounds ($4.0 billion) in August.

Consumer borrowing, a key driver of economic growth, increased by only 300 million pounds in August from July compared with a median forecast for a 1.45 billion pound increase in the Reuters poll.

Compared with August last year, consumer borrowing sank by 3.9%, the sharpest fall since the BoE began measuring the data in 1994.

Alistair McQueen, head of savings and retirement at insurer Aviva, said many households were likely to start saving more in anticipation of further economic turmoil as stricter local lockdown measures are reintroduced in some places.

“This will dent consumer spending, which will curb the UK’s economic recovery,” he said.

Home-buyers were given an incentive by finance minister Rishi Sunak, who cut a tax on house purchases in July as he sought to boost the broader economy after its record 20.4% contraction between April and June.

The COVID-19 lockdown has prompted people to rethink the kind of home they want to live in as well as creating pent-up demand in the housing market.

A Reuters poll showed analysts thought British home prices will rise 2.0% this year, a sharp contrast with a 5.0% fall predicted in a previous poll just three months ago.

The poll also showed prices were expected to stagnate next year after Sunak’s tax break ends and unemployment rises.

A survey published on Tuesday suggested people in Britain were, at least for now, continuing to recover from the shock of the lockdown.

Polling firm YouGov said its consumer confidence index rose for the fifth month in a row although it remained well below its pre-pandemic levels.

“With the recent introduction of further coronavirus restrictions it remains to be seen whether September’s positive index score will rise or fall now these restrictions have come into effect,” YouGov said.

($1 = 0.7769 pounds)

(Reporting by William Schomberg and David Milliken; Editing by Catherine Evans)