UK financial institutions increase mortgage approvals, leading to a rise in consumer borrowing
UK Mortgage Approvals and Consumer Borrowing See a Surge in June 2021
New data released on Tuesday reveals a significant increase in both mortgage approvals and consumer borrowing in the UK last month. The Bank of England provided the information about mortgage approvals, while the source for the unsecured consumer borrowing data remains undisclosed.
The data shows that mortgage approvals for house purchases increased by around 900 to 64,167 in June 2021, signalling growing borrowing demand. This rise follows a dip after the expiry of a tax break for homebuyers in April 2021, which saw mortgage approvals drop to over 60,000 that month. However, the recovery in mortgage approvals in May and June 2021 is primarily linked to the temporary boost caused by the impending expiry of the tax break.
Net mortgage borrowing grew significantly, with net lending jumping £3.1 billion to £5.3 billion in June 2021 compared to May. This recovery from sharp falls in borrowing following the stamp duty holiday's initial expiry in April 2021 is partly due to falling mortgage interest rates and some easing in affordability tests, although market caution remains due to economic uncertainty.
Consumer credit also increased alongside mortgage borrowing in June, reflecting broader rising borrowing appetite among households. Unsecured consumer borrowing increased by 1.417 billion pounds in June, exceeding the median forecast in the Reuters poll of economists.
Richard Donnell, executive director at real estate website Zoopla, attributes the rise in demand for mortgages to stable borrowing costs. Zoopla data indicates an 8% increase in housing sales agreements compared to the same period last year, suggesting a recovery in the housing market. Additionally, there is a 11% increase in the number of buyers in the market, according to Zoopla data.
This phenomenon illustrates how tax incentives like the stamp duty holiday can temporarily distort normal housing market activity and borrowing patterns, leading to spikes in mortgage approvals and consumer borrowing concentrated near the incentive's expiry. However, it remains to be seen whether this trend will continue in the coming months as the housing market adapts to the post-stamp duty holiday landscape.
[1] Bank of England - Mortgage Approvals Data [2] The Guardian - Stamp duty holiday: what is it and when does it end? [3] Reuters - UK mortgage approvals rise more than expected in June [4] Financial Times - UK mortgage approvals up in June as buyers rush to beat stamp duty deadline [5] Zoopla - UK housing market report for June 2021
[1] The Bank of England's recent data reveals a rise in mortgage approvals for business activities like house purchases, indicating growing demand in the UK's finance sector.
[2] The surge in unsecured consumer borrowing in June 2021, as indicated by the data, highlighted a broader business trend of increased borrowing appetite among households in the UK.
