Mortgage approvals hit five year low

There were 36,115 seasonally-adjusted mortgage approvals in the UK in December, latest data from UK finance shows.

December also saw UK banks issue the lowest amount in loans for house purchase since September 2016, lending a total of £7.02 billion.

The drop to the lowest number of approvals see since April 2013 occurred despite a reduction in stamp duty for first-time buyers, which took effect in November.

However, experts said it was too soon for that to have made a difference.

Rather, some borrowers may have been put off by the increase in standard variable rate mortgages in December, following the Bank of England’s decision to raise base rates to 0.5 per cent in November.

Dr Howard Archer, chief economic adviser to the EY Item Club, said: “December’s marked drop in mortgage approvals suggests that already pressurised housing market activity took a further hit from the Bank of England raising interest rates in early November,”

He added: “Housing market activity has been under pressure from squeezed consumer finances and fragile confidence.”

Meanwhile, UK Finance data also showed credit card spending to have decreased slightly during the last month of 201, with annual growth in outstanding credit at 5.3 per cent.

But business borrowing has continued to moderate through the year, with the manufacturing sector showing only modest annual growth, while construction and property-related sectors have contracted their bank borrowing over the year.

Eric Leenders, managing director of personal finance at UK Finance, said: “Business lending is up year-on-year, even though December saw the usual seasonal net repayment across all industries and sizes of borrower. However, healthy export levels and an uptick in overall business confidence suggest that in this New Year, there may be an appetite to capitalise on opportunities for growth supported by continued favourable borrowing conditions.”