UK mortgage approvals increased unexpectedly in May, figures from the Bank of England revealed Tuesday.
Approvals for house purchases increased to 87,500 in May from 86,900 in April. The number remained above pre-February 2020 levels and economists’ forecast of 85,900.
Net mortgage borrowing rebounded to GBP 6.6 billion in May from GBP 3.0 billion in April. The expected level was GBP 4.58 billion.
The BoE said this followed variability in the previous couple of months in anticipation of the reduction in stamp duty ending, which has been extended to the end of June.
Elevated mortgage approvals in May confirm that home purchase demand remains strong, Andrew Wishart, an economist at Capital Economics, said.
The return of stamp duty to normal levels will weigh on transactions volumes and mortgage lending somewhat, Wishart noted. But other factors boosting buyer demand will ensure that the dip in activity is short- lived.
For the first time since August 2020, consumers borrowed more than they paid off in May, with net borrowing of GBP 0.3 billion. The annual growth rate remained weak, but rose to -3.2 percent in May from -5.7 percent in April.
Data showed that UK non-financial businesses made net repayments of GBP 2.2 billion to banks in May, after repaying GBP 4.8 billion in April. Small and medium sized non-financial businesses repaid loans by GBP 0.4 billion.
Further, the M4 money supply grew at a slower pace of 7.3 percent annually in May from 9.1 percent in April. Month-on-month, M4 edged up 0.4 percent.
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