In December, mortgage approvals in the UK reached a six-month peak, following the first reduction in interest rates in over two years, according to a report released by the Bank of England.
These approvals, which serve as a future borrowing indicator, rose to 50,500 in December, up from 49,300 in November. The effective interest rate, representing the actual interest on newly issued mortgages, fell by 6 basis points to 5.28 percent, marking the first decline since November 2021.
The data suggests that individuals paid back £0.8 billion in mortgage debt in December, in contrast with the previous month's net-equilibrium. This static annual growth rate is an unprecedented low since record-keeping started in March 1994.
Consumer credit borrowing slipped to £1.2 billion from £2.1 billion in November, largely due to a decrease in credit card usage. As a result, the growth of consumer credit has dropped to 8.5 percent. Credit card borrowing declined to £0.3 billion from £1.0 billion, while borrowing via other consumer credit forms dipped to £0.9 billion from £1.1 billion.
Households made net deposits of £5.4 billion with banks and building societies in December. Meanwhile, non-financial businesses took out loans amounting to £0.7 billion, following repayments of £1.4 billion in November.
Analysts at Capital Economics claim this data implies that the shift from interest rates impeding activity to stimulating it has commenced. They maintain that this supports the forecast that the economic recovery will gain momentum later this year.
