Bank mortgage approvals show the highest level since 2015.
Mortgage approvals, mortgage applications approved by high street banks, reached its highest level for 5 years.
Experts have said this could be a sign or a revival in the housing market.
However, Samuel Tombs, the chief UK economist at the consultancy Pantheon Macroeconomics struck a cautious note when he said any post-election bounce would be shown in the January data, as it took about two weeks for buyers to receive a mortgage offer.
He said the jump in
December probably reflected falling borrowing costs for households in the
second half of 2019.
Gabriella Dickens, an assistant economist at consultancy Capital Economics, said:
“So instead of reflecting a broader expansion in credit, much of the annual rise recorded by UK Finance reflects these lenders competing for market share.”
The rise in mortgage approvals comes amid intense competition among high street banks to sell home loans.
The Bank of England has recently discussed cutting interest rates after the UK economy flatlined at the end of last year. Intense political uncertainty over Brexit and the snap general election have both been factors in making a decision.
The Bank could bemore likely to leave interest rates on hold if there was a property upturn.
Mortgage approval figures.
Mortgage approvals for house purchases saw an increase to 46,815 in December. This compared with 44,058 a month earlier, according to UK Finance.
UK Finance, The
trade body that represents major high street banks across the country said the
value of mortgage lending increased the most since March 2016, rising by a net
The Bank of England will get a new governor in March, Andrew Bailey, who is currently head of the Financial Conduct Authority (FCA). This Thursday’s meeting of the Monetary Policy Committee will be the current governor, Mark Carney’s last.
City economists believe a decision between holding borrowing costs steady and cutting the key rate from the current level of 0.75% rests on a knife-edge
What will the Bank do?
The Bank could decide to leave rates on hold. There has been speculation that the Bank may cut rates once again. However, retail sales unexpectedly plunged in December.
Inflation dropping could also be a reflection of weakness in the economy at the end of last year.
The rise in mortgage borrowing, a jump in employment levels and increasing business confidence since Boris Johnson’s election victory could still encourage the Bank to leave rates on hold.
Howard Archer, the
chief economic adviser to the EY Item Club said it was likely that mortgage
approvals were lifted by increased confidence since the election.
“Prior to November, mortgage approvals for house purchases had fallen back for three successive months to be at a seven-month low in October, indicating that activity was being pressurised by heightened uncertainties over the domestic political situation and Brexit,” he said.
Brexit trade talks could still have an impact.
Despite the upturn
in mortgage approvals, the outlook for the housing market will also depend on
the next phase of the Brexit talks with Brussels, as the government attempts to
strike a trade deal with the EU before the end of 2020.
Andrew Montlake, the managing director of the mortgage broker Coreco, said:
“It goes without saying that a huge amount is riding on the outcome of the trade negotiations and so there is still the potential for significant volatility.”
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