The Bank of England released data on Friday indicating a slight decline in UK mortgage approvals for April, with an increase in household deposits into individual savings accounts (ISAs) to capitalize on higher interest rates. Mortgage approvals fell to 61,100 from 61,300 in March, contrary to the expected rise to 61,500.
The effective interest rate on newly drawn mortgages inched up by one basis point to 4.74 percent in April. Additionally, mortgage lending rose to GBP 2.4 billion, up from a stagnant GBP 0.5 billion.
Annual net mortgage lending growth registered at 0.2 percent, marking the first annual increase since October 2022, compared to a 0.1 percent decline in March. Gross lending also showed a slight increase, reaching GBP 20.6 billion from GBP 20.5 billion in March, the highest figure since January 2023.
Net consumer credit borrowings were halved to GBP 0.7 billion from GBP 1.4 billion the previous month, missing the expected GBP 1.5 billion. This drop is attributed to reduced net borrowing from credit cards and other consumer credit forms.
In April, businesses repaid GBP 1.1 billion in loans to banks and building societies, slightly up from GBP 0.9 billion in March. Borrowing by large businesses fell by 0.3 percent, and lending to SMEs decreased by 4.6 percent year-on-year.
Furthermore, households' monetary holdings increased by GBP 8.4 billion in April, the highest since September 2022. Households also deposited an additional GBP 11.7 billion into tax-free ISAs, the highest on record.
Ashley Webb, an economist at Capital Economics, noted that the money and lending figures suggest a cooling in the recent housing market rebound, and that households curtailed their spending in April. Nonetheless, the economist anticipates that interest rate cuts starting in the summer and further declines in inflation will lead to a stronger-than-expected economic recovery this year.
In May, the Bank of England maintained its interest rate at 5.25 percent, unchanged for the sixth consecutive meeting and the highest level since early 2008. The bank also hinted at the prospect of the first rate cut since 2020.
