UK housing market “stepping up a gear”
Mortgage approvals rise by more than had been expected
The UK property market is showing signs of recovery
UK mortgage approvals rose more than economists forecast in May to the highest since 2009, indicating that the Bank of England’s credit-boosting program is aiding the housing market. Lenders granted 58,242 home loans compared with a revised 54,354 in April, the Bank of England said today in London.
Net mortgage lending rose by £282 million pounds (€329 million). Property researcher Hometrack said today that house prices rose 0.4 per cent in June, matching the biggest increase in six years. The BOE’s Funding for Lending Scheme has helped ease credit strains for homeowners by lowering banks’ fundiThe London, said before today’s data. Separate BOE data showed that overseas investors increased their holdings of UK government bonds in May. Non-residents bought £6.9 billion more gilts than they sold.
While mortgage lending has benefited from the FLS, the BOE report showed continued weakness in credit to businesses. Loans to non-financial businesses fell by £1.3 billion pounds in May. Lending fell 3.6 per cent from a year earlier. Consumer credit rose £725 million pounds in May.
Separately today, Markit Economics said its index of manufacturing rose to 52.5 in June from 51.5 in May, exceeding economists’ forecast. The pound erased its loss against the dollar after the reports and was at $1.5230 as of 9:33 a.m. in London, up 0.1 per cent from Friday.
In another release, the BOE published the minutes of the Financial Policy Committee’s June 18 meeting, at which it ordered a review of banks’ exposure to interest-rate risks. While some FPC members noted that an increase in rates would occur alongside a strengthening economy, which would mitigate any impact, others were concerned about the potential impact on liquidity. “There would be a sharp reduction in market liquidity in the event that these risks crystallized,” some FPC members said. “There was potentially more leverage in the system than it was possible to identify.” The members added that “some of these concerns were heightened given the increased volatility in financial markets in the days prior to the meeting.”