U.K. Mortgage Approvals Rise Less Than Forecast

U.K. Mortgage Approvals Rise Less Than Forecast

June 29 (Bloomberg) -- U.K. home-loan approvals climbed less than economists forecast last month as the credit squeeze led to the smallest increase in net mortgage lending since records began in 1993.

Banks granted 43,414 loans in May, compared with 43,191 in April, the Bank of England said today in London. Economists predicted 46,000, the median of 22 forecasts in a Bloomberg News survey shows. Net mortgage lending rose by 324 million pounds ($536 million), about a third of the pace in the previous month.

Residential property held its value for a second month in June after falling for more than a year, Hometrack Ltd. said today. Bank of England policy maker Kate Barker said last week the housing market is still “some way away from normal” and officials have cautioned that the lending squeeze threatens to delay Britain’s economic recovery.

“These are disappointing numbers,” said David Page, an economist at Investec Securities in London. “We’ve seen approvals basically stall and lending in absolute levels remains very low. This is reminds us that prospects for improvement in the housing market rely on the financial sector.”

The pound fell as much as 0.2 percent against the dollar after the report, before recovering its losses. The British currency traded at $1.6499 as of 10:08 a.m. in London today.

Gross mortgage lending fell to 10.6 billion pounds in May, the least since 2000, from 10.9 billion pounds in April, the Bank of England said.

Hometrack Report

The average cost of a home in England and Wales was 155,600 pounds this month, Hometrack said. Prices stopped falling in May on the research group’s measure for the first time in 20 months. From a year earlier, values fell 8.7 percent in June.

The central bank said in its Financial Stability Report on June 26 that banks have curbed mortgage lending to all but the safest borrowers. That may hamper a recovery in the economy after it shrank 1.9 percent in the first quarter, the most since 1979. More mortgage holders are likely to default as unemployment rises, the bank said.

Still, lower interest rates may relieve some of the pressure on homeowners, the U.K. central bank said last week. Policy makers this month kept the benchmark interest rate at a record low of 0.5 percent.

Individuals, whose overall debts total 1.5 trillion pounds, added to non-secured borrowings at a faster pace in May. Net consumer credit rose by 300 million pounds, compared with 200 million pounds in April, as net lending on personal loans and overdrafts increased for the first time in five months.

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