UK Mortgage Approvals Dip as Household Borrowing Surges
The UK mortgage approvals have dipped in May, according to the latest data from the Bank of England. This decline is attributed to the lingering affordability concerns and high borrowing costs, causing borrowers to approach the market with caution.
Mortgage approvals dip in May
The number of mortgage approvals for house purchases decreased to 60,000 in May, down from 60,800 in April. This figure is an indication of what future borrowing and house sales will look like. Property buyers borrowed half the amount of money to secure their homes, dropping from a total of £2.2 billion to £1.2 billion month on month.
“Inflation may be easing, but persistently high borrowing costs are still making it hard for buyers to secure the homes they want.” - Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners
Meanwhile, consumer credit borrowing bounced back to £1.5 billion during the month, up from £800 million in April. This includes borrowing through methods such as credit cards, personal loans, and car finance, all of which saw an increase month on month.
Consumer credit borrowing bounces back
Experts warn against taking on more debt at a time when interest rates remain at a 16-year high. Karim Haji, global head of UK financial services at KPMG, stated that the uptick should be “monitored closely by lenders”.
“Even if the Bank of England opts to cut the base rate at the next meeting, a likely 25 basis point cut would still leave the base rate above its long-run level.” - Karim Haji
The rise in consumer borrowing could be partially due to increased spending ahead of the summer holidays. However, it is essential to exercise caution when taking on debt, especially with interest rates remaining high.
Summer spending on the rise
The amount of money households deposited with banks and building societies grew by £5.3 billion in May. This was driven by an additional £4.2 billion flowing into ISA accounts, after a record-high inflow of £12.3 billion being locked into savings the previous month.
Household savings on the rise
As the UK mortgage market continues to navigate the challenges of high borrowing costs and affordability concerns, it is crucial for borrowers to remain vigilant and cautious in their financial decisions.
