Mortgage approvals in the UK were unexpectedly flat in May, but both consumer credit and net mortgage lending rose faster than expected, according to new figures released by the Bank of England.
The Bank of England said mortgage approvals in May dropped to 49,815 from 49,828 in the previous month. The figures point to quiet housing market activity, as they were below the levels seen last year, excluding those during the housing boom in the last decade.
"Given that we have just had a very restrictive Budget, it is difficult to see a big rebound in the key housing market metrics over the short term. However, it is not impossible to begin to see some sort of revival before the end of the year," said Philip Shaw, an economist from Investec.
However, despite the weak mortgage approvals, net mortgage lending increased further than expected, rising to 1.184 billion pounds from April’s 0.979 billion pounds, a figure that was revised from an initial forecast of 0.490 billion pounds.
Consumer credit also rose faster than expected, climbing up to 331 million pounds last month from 114 million pounds in April. But credit card lending posted its lowest figures since September 2009.
Some analysts had forecasted an increase in unsecured lending of 0.1 billion pounds, with mortgage lending seen up by 0.8 billion pounds.
Howard Archer from IHS Global Insight said that “despite the modest rise in consumer credit in May, the impression remains that consumer appetite for taking on new borrowing is limited while there is an ongoing desire of many consumers to reduce their debt.”
The bank said lending conditions remain constrained but there have been signs that credit flows are increasing after the UK’s deepest recession since World War II.