Mortgage approvals
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Mortgage approvals have slumped to a near six-year low, industry data showed on Tuesday, as heightened Brexit uncertainty rattled the UK housing marking.

According to UK Finance, which represents high street banks and other lenders, 35,299 mortgages were approved in February on a seasonally-adjusted basis. That was down from January’s revised figure of 39,555, a 2.2% decline on February 2018 and the lowest since April 2013.

Gross mortgage lending across the residential market was £19.1bn, 2.5% higher than February 2018.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the sharp fall was “almost entirely due to the recent jump in Brexit uncertainty”.

He continued: “Surveys such as the RICS Residential Market Survey have pointed to a downturn in house buyer demand since November, so the prior resilience of approvals in January had been puzzling. According to RICS, new buyer enquiries fell in February at the fastest rate since May 2008, so we expect approvals to continue to fall over the coming months.”

However, Pantheon Macroeconomics argued that – provided the UK quits the European Union with a deal – the housing market should steady itself as the year progresses, with the UK Finance measure of approvals returning to between 40,000 and 50,000 in the second half.

Howard Archer, chief economic advisor to the E&Y ITEM Club, said February’s fall meant mortgage approvals are now “well below the 38,000-40,000 range that largely held through 2018”.

“February’s drop to a near six-year low adds to recent indications that heightened economist and Brexit uncertainties are weighing down on the housing market,” he added. “It is already under pressure from overall challenging conditions – still relatively limited consumer purchasing power after an extended squeeze, fragile consumer confidence and wariness over higher interest rates.

“With Brexit now likely to be delayed until 22 May at least, further uncertainty is likely to weigh on the housing market. This has caused us to trim our forecast for house price growth over 2019 to just 1%.”

UK Finance also said that unsecured consumer credit growth was 3.8% in February. That is the lowest level since October and only marginally ahead of July’s 3.7%, the weakest since October 2014.

Credit card spending was £9.7bn in February, 1.1% up on the same month in 2018. Personal loans were ahead 2.3% while overdrafts were 0.6% lower.

Archer said it appeared consumers were being “relatively cautious” in their borrowings, while lenders had become “warier” about advancing unsecured credit.

By Abigail Townsend

Source: ShareCast

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