Britons’ borrowing of mortgages and consumer credit rose at a faster pace in June, fresh Bank of England data has revealed, in signs that the recovery in the housing market is “well underway”.
In monthly statistics released by the Bank to signal trends in the UK banking system, it was revealed that net borrowing of mortgage debt increased by £3.1bn in June while borrowing of consumer credit grew by some £500m compared to the previous month.
The average monthly gain in consumer credit over the last six months was £1.3bn by comparison, showing the growth in households’ appetite for borrowing.
Mortgage approvals also increased to around 64,200 from 61,300 previously in May. Remortgaging approvals also hit its highest level since October 2022.
Lucian Cook, head of residential research at Savills, said the rise did not indicate the housing market was back on its feet given “relative caution among prospective home movers” in the south of England.
“The steady rise in mortgage approvals is encouraging, but despite some easing in how lenders apply affordability tests, approvals remain slightly below levels typically seen in a normal market,” Cook said.
“Changes in the way mortgage regulations are being applied have the capacity to free up more mortgage lending among both first time buyers and home movers, especially as we see further interest rate cuts.
“We anticipate that mortgaged buyer demand will pick up gradually heading into early autumn. However, for momentum to truly build, households must feel more confident not only in their personal finances but also in the broader economic environment.”
Housing market in recovery mode
Capital Economics UK economist Ashley Webb said the rise in mortgage approvals showed the recovery in the housing market after a post-stamp duty decline was “well underway” though the £7.8bn rise in bank deposits among households suggested Brits were in the “mood to save rather than spend”.
Small and medium-sized businesses borrowed more in the year to June in what represented the first positive growth rate in nearly four years.
The annual growth rate of lending to businesses was slightly lower than last month but it was still the second-strongest rate seen since March 2021, as Pantheon Macroeconomics’ Elliott Jordan-Doak pointed out.
Jordan-Doak said the Bank’s expected decision to cut interest rates by 25 basis points to four per cent next week could mean high levels of corporate borrowing are sustained.
“Falling borrowing costs should further support corporate credit flows in the coming months,” he said.