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On a downward trend: both mortgage approvals and remortgaging numbers fell in August. Photograph: Joe Giddens/PA
On a downward trend: both mortgage approvals and remortgaging numbers fell in August. Photograph: Joe Giddens/PA

Mortgage approvals fall by a fifth, says British Bankers’ Association

This article is more than 7 years old

Figures from the BBA show that the number of deals approved for house purchases this August was the lowest figure since January 2015

The number of homebuyer mortgages approved by UK banks was down by a fifth year-on-year in August, but consumers’ appetite for unsecured borrowing remained strong, latest figures show.

Seasonally adjusted data from the British Bankers’ Association shows that 36,997 loans were approved for house purchases during the month, the lowest figure since January 2015 and 21% down on August 2015’s total. Remortgaging numbers also slipped, with 23,940 loans approved for those switching lenders.

Figures for gross mortgage lending, which show the value of loans advanced to borrowers and do not take into account repayments, showed a 1% increase since August 2015, at £12.4bn.

The loans may have been applied for some weeks before they were approved, and reflect a period soon after the EU referendum.

The BBA’s chief economist, Dr Rebecca Harding, said the figures pointed to a softer housing market in August. “The data was collected before the Bank of England reduced interest rates to 0.25%, and so give an indication of some of the underlying pressures that the MPC [monetary policy committee] was responding to when it made this decision,” she said.

“Mortgage borrowing is growing at a slower pace than it has for the past few months reflecting both the slowdown in housing market growth after the April spike and broader trends in the sector.”

The BBA said that away from mortgages, consumer credit had continued to grow at a rate of more than 6%. Borrowing through personal loans and overdrafts increased by £343m during the month, while credit card borrowing was up by £136m.

“Given the low interest rate environment and high levels of confidence during the summer, the strong credit growth can be interpreted as strong consumer sentiment,” Harding said.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said demand from homebuyers continued to weaken, despite a steady fall in mortgage rates since the start of the year.

“Admittedly, it is too soon to see the full impact of the MPC’s interest rate cut on mortgage approvals, given the time it takes for loan applications to be approved.

“Still, a small majority of surveyors reported that new buyer enquiries fell in August, according to Rics – the fifth consecutive month of declining demand. Meanwhile, the outlook for stagnation in households’ real incomes next year, as inflation picks up and hiring slows sharply, points to a prolonged period of weakness in mortgage lending ahead.”

Separate figures from the National Association of Estate Agents, meanwhile, showed that the stock of properties for sale picked up in August, increasing to 41 per branch. This was the highest level since March, although some way off the average of 54 homes seen then.

The NAEA said three-quarters of properties sold for less than the original asking price during the month, down slightly from 79% in July.

The BBA also reported a rise in deposits into savings and bank accounts since the start of the year. It said personal deposits grew by £27bn in the first eight months of the year, compared with £15bn in the same period of 2015.

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