2024.01.3012:23:00UTC+00UK Mortgage Approvals Reach 6-Month High

British mortgage approvals hit a six-month high in December as interest rates dropped for the first time in more than two years, data published by the Bank of England showed on Tuesday.

Approvals for house purchases, an indicator of future borrowing, increased to 50,500 in December from 49,300 in November.

The effective interest rate, which is the actual interest paid on newly drawn mortgages dropped 6 basis points to 5.28 percent. This was the first fall since November 2021.

Data showed that individuals repaid GBP 0.8 billion of mortgage debt in December compared to net zero in the previous month. The annual growth rate was flat for the first time since the series began in March 1994, a new series low.

Due to the lower borrowing through credit cards, consumer credit borrowing declined to GBP 1.2 billion from GBP 2.1 billion in November. Consumer credit growth softened to 8.5 percent.

Borrowing through credit cards slid to GBP 0.3 billion from GBP 1.0 billion and borrowing through other forms of consumer credit declined to GBP 0.9 billion from GBP 1.1 billion in November.

Households deposited a net GBP 5.4 billion with banks and building societies in December.

Meanwhile, non-financial businesses borrowed GBP 0.7 billion, following GBP 1.4 billion of repayments in November.

Data suggests the transition from interest rates being a drag on activity to being a boost is beginning, economists at Capital Economics said.

This supports the assessment that the economic recovery will start later this year, they added.