Mortgage approvals for house purchases edged up in July, the third month in a row that has seen a rise, official data has shown.
Money and credit statistics published by the Bank of England showed the housing market remains intact despite fears it might slump ahead of the Autumn Budget.
The rise in approvals came despite a fall in net borrowing of mortgage debt by £900m, with the previous month posting a £3.2bn increase.
The annual growth rate of borrowing by large businesses increased from 5.7 per cent to eight per cent.
The borrowing growth rate for small and medium-sized firms (SMEs) increased from 0.3 per cent to 0.9 per cent, the highest level since August 2021.
Paul Dales, chief UK economist at Capital Economics, said fresh lending data suggested interest rate cuts over the last year had not boosted the UK economy while incoming tax threats may be forcing households to save more.
“Mortgage rates have not fallen as far as Bank Rate over the past year, which is holding back housing activity,” Dales said.
“It might also be the case that the prospect of tax rises in the Budget later this year is also restraining activity in the housing market and the wider economy.
“These figures broadly support our view that the economy will grow at a subdued pace over the second half of this year, with possible tax rises in the Budget being an extra downside risk.”
Mortgages boost keeps housing market afloat
Fresh data also showed that households saved some £7.3bn more in the month of July.
Britons put £4.3bn into standard savings accounts and £2.7bn into ISAs over the month.
The effective interest rate paid on individuals’ savings with banks and building societies was 3.84 per cent in July, which is falling at a slightly slower pace than the Bank of England’s interest rate cuts.
Consumer credit borrowing grew slightly to £1.6bn from £1.5bn in the previous month, data also showed.
“Overall, today’s money and credit data give a tentative sign of consumer spending picking up a little, and of business sentiment improving,” said Thomas Pugh, chief economist of the consultancy firm RSM UK.
“At the margin, that probably further decreases the chances of another interest rate cut this year, but the inflation and labour market data remain key.”