The latest data released by the Bank of England has shown that mortgage approvals in the UK fell to their lowest level in six months in August. This decline is attributed to the impact of higher interest rates on the economy. At the same time, consumer credit has continued to rise.
According to the figures published on Friday, net mortgage approvals for house purchases dropped from 49,500 in July to 45,400 in August. Remortgaging approvals also decreased to their lowest level since July 2012, falling from 39,300 to 25,000. These declining numbers indicate that potential homeowners are being deterred by the rising interest rates.
The average interest rate on new mortgages increased by 16 basis points to 4.82%, the highest since 2008. This rise in interest rates has likely made borrowing for a home less attractive and affordable for many individuals, resulting in a decrease in mortgage approvals.
However, while mortgage approvals saw a decline, consumer credit has been on the rise. In August, individuals borrowed an additional £1.6bn in consumer credit, up from £1.3bn in July and above the six-month average of £1.4bn. This suggests that despite the challenges in the housing market, consumers are still willing to take on debt for other purposes such as purchasing goods or funding holidays.
The divergence between mortgage approvals and consumer credit indicates a growing disparity in the borrowing habits of individuals. It is possible that the rising interest rates have made mortgages less attractive for potential homebuyers, leading to a decline in approvals. On the other hand, consumers may be more willing to take on debt for non-housing related expenses.
These figures provide insight into the current state of the UK economy. With mortgage approvals at a six-month low, it is evident that higher interest rates are having an impact on the housing market. Additionally, the rise in consumer credit highlights the resilience of consumer spending, despite the challenges in the property market.
Moving forward, it will be interesting to observe how these trends develop. If interest rates continue to rise, it is likely that the housing market will experience further declines. However, consumer credit may continue to rise, indicating that individuals are finding ways to adapt to the changing economic conditions.
Overall, the data from the Bank of England shows that mortgage approvals in the UK have fallen to their lowest level in six months, indicating the negative impact of higher interest rates on the housing market. However, consumer credit has continued to rise, highlighting the resilience of consumer spending in the face of economic challenges.