New mortgage approvals by Britain’s high-street banks jumped to their highest number since 2015 in December, thanks to record-low interest rates.
Banks approved 46,800 mortgages during the month, up 6.3 per cent from November, and 19.6 per cent higher than in December 2018, according to UK Finance, an industry body that tracks seven high-street banking groups that account for roughly two-thirds of the overall market.
December marks the second consecutive month that mortgage approvals increased, after three consecutive monthly contractions. It brings the seasonally-adjusted number of approvals to their highest level since August 2015.
Economists say the increase is largely due to falling mortgage rates. “The jump in mortgage approvals in December likely solely reflects the stimulus provided by the sharp fall in mortgage rates in the second half of last year,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics. “The additional boost to approvals from the result of the general election still is to come.”
The mortgage tracker rate dropped to 1.98 per cent in November, down from 2.72 per cent in January 2016, according to data from the Bank of England, reducing costs for house purchasers.
Economists expect a post-election boost in property transactions and mortgages. A survey of UK estate agents by the Royal Institution of Chartered Surveyors in the second half of December found that sales and price expectations were at their highest level for three years.
However, the expected growth in mortgages is not reflected in the data because of the time lag between when a borrower approaches a lender and receives a mortgage offer — usually about four weeks.
After 2017 mortgage approvals dropped below a monthly average of 40,000 but they began creeping up in the second half of 2019, partly because of falling interest rates, but also due to higher wage growth and rising employment.
UK Finance data showed that over 2019 as a whole, 982,286 mortgages were approved by the main high-street banks, 7.4 per cent more than in 2018; remortgage approvals were up 7.9 per cent over the same period.
The average value of loans for home purchase in December was £217,900, up 2.4 per cent compared with the previous month — the second strongest monthly increase since May.
However, economists warn that subdued economic growth and uncertainty mean the revival of the housing market may be weak, despite low interest rates, fiscal stimulus expected in the budget, a shortage of property and the possibility that the BoE could cut interest rates this year.
“The economy still looks set for a pretty challenging 2020 and there will still be appreciable uncertainties, including on the UK-EU relationship front — so that the upside for house prices in 2020 is likely to be limited,” said Howard Archer, chief economic adviser at the consultancy EY Item Club.
Source: Economy - ft.com
