U.K. mortgage approvals on high while consumer credit eases

Mortgage approvals shot up to their highest level since January 2014 at 71.0k, following an upwardly revised print of 69.0k in July. Net lending secured on dwellings also picked up materially to £3.4bn (from an upwardly revised print of £2.8bn), reporting its biggest increase since May 2008. Meanwhile, the pace of consumer credit flow slowed to its February 2015 print of £0.9bn from £1.2bn in July.

Monetary aggregates broadly maintained momentum, with core M4 lending excl. OFCs growing by 2.3% y/y (after 2.4% y/y in July). M4 lending to households rose slightly to 2.6% y/y while M4 lending to NFCs were unchanged at -0.3% y/y. Net finance raised by NFCs increased to its highest in four months, still driven by bond and equity issuance, even though loans turned positive for the first time in four months.

Mortgage activity has improved on the back of strong confidence, and while it looks likely to continue, the pace could begin to slow somewhat. According to the RICS survey, for instance, newly agreed sales have begun to ease, albeit prices are set to increase further, driven by the enduring mismatch in supply and demand. 

"A lack of transactions is likely to weigh on mortgage approvals, and despite high prices supporting flows further, the housing market expected to remain subdued in the coming quarters. On the consumer front, easing in credit despite cyclically high consumer confidence and growing wages could point to marginally more cautious behavior as household face back-to-school expenses. This, together with growing fiscal austerity in H2, is likely to make households think twice before taking up a new loan", says Barclays.