Recent data shows that UK Banks approved fewer mortgages last month, the lowest since September 2016 with a total of 40,488, according to a report by the UK Finance Trade association. They also said that the annual rate of credit card borrowing dipped to 5.1%, down from 5.5% in September.
It appears that consumers are easing of on new mortgage borrowing and consumer credit borrowing.
Overdraft and personal loan borrowing also had a lower growth rate, falling further into negative territory; falling from minus 2.2% to 2.7%.
The growth rate of personal loan and overdraft borrowing fell further into negative territory, hitting minus 2.7 per cent, down from minus 2.2 per cent previously.
Samuel Tombs of private equity firm Pantheon said the latest mortgage-approvals fall “appears to be just the start of a bigger downturn” for the housing market.
“The Chancellor’s decision to cut stamp duty for first-time buyers [in the Budget] won’t do much to counter this downturn, primarily because it will push up prices,” he said.
The Bank of England is likely to welcome the new data on consumer borrowing. It was becoming increasingly concerned about the increase in risky lending by the Banks.
The Banks will be issuing their own, more comprehensive data on UK household borrowing later this month. The previous report indicated that the annual rate of consumer borrowing was still growing at just below 10% in September. The Bank of England also took the step to raise interest rates earlier this month for the first tme in a decade in a bid to curb inflationary pressures.
UK Finance said, “It remains to be seen whether the Bank of England’s interest-rate hike will have a marked dampening impact on consumer borrowing,” said Howard Archer of the EY Item Club. “While the increase was just 25 basis points and interest rates are still at historically very low levels, a number of consumers could be vulnerable given high borrowing levels. There may also be a psychological impact on potential borrowers given that it was the first interest-rate hike since 2007.”
Since 2016 and the Brexit vote economic growth in the UK has been sustained, largely, by household consumption. This has in itself been buoyed by consumer borrowing.
The latest UK Finance data also showed that there was a net outflow of £1.5bn from people’s cash ISA deposits in October, the largest fall on records going back to 2010.
GDP growth in the third quarter of 2017 was confirmed by the Office for National Statistics this week at 0.4 per cent, with household spending, again, driving activity.