In October, the UK witnessed a significant uptick in mortgage approvals, reaching their highest level in over two years, as declining interest rates invigorated the housing market. However, consumers demonstrated increased caution regarding borrowing and saving in anticipation of the Autumn Budget.
The Bank of England reported on Friday that mortgage approvals for house purchases—a forward indicator of borrowing trends—climbed to 68,303 in October, up from 66,115 in the preceding month. This marks the most substantial level since August 2022, despite forecasts predicting a decline to 65,000.
The effective interest rate, representing the actual interest incurred on newly issued mortgages, fell by 15 basis points to 4.61 percent in October, the lowest since May 2023.
Remortgage approvals rose for the third consecutive month, reaching 31,400 in October. Following a dip in September, net mortgage borrowing increased by £0.9 billion, totaling £3.4 billion. Net mortgage lending growth continued its upward trajectory, improving to 1.1 percent, a trend ongoing since April.
October saw gross lending expand to £20.2 billion from £19.5 billion in the previous month.
Conversely, net consumer credit decreased to £1.1 billion in October from £1.2 billion in September. Within this, net borrowing through other consumer credit channels dropped to £0.6 billion, whereas net borrowing via credit cards rose to £0.5 billion.
Moreover, business net borrowing surged to £3.9 billion from £0.1 billion in September, according to the Bank of England. Today's data suggest that concerns surrounding the budget have led households to adopt a more cautious approach to borrowing and saving, remarked Ashley Webb, an economist at Capital Economics. Webb pointed out that the subdued activity in November hints that the tax increases outlined in the Budget are impacting consumer expenditures for the current month as well.
Webb warned that without a swift resurgence in consumer confidence, the economy's growth in the fourth quarter may fall short of expectations.
