UK mortgage approvals and consumer credit jump despite higher rates
Table of Contents
Introduction
UK Mortgage Approvals Jump in June
Consumer Credit Grows at Fastest Pace in Five Years
Reasons for the Increase in Mortgage Approvals and Consumer Credit
Implications of the Increase in Mortgage Approvals and Consumer Credit
Conclusion
In June 2023, UK mortgage approvals jumped to their highest level since October 2022. This was despite the fact that interest rates have been rising in recent months. Consumer credit also grew at its fastest pace in five years.
This unexpected increase in mortgage approvals and consumer credit has raised some questions. Why did these figures rise despite the higher interest rates? What are the implications of this increase?
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UK Mortgage Approvals Jump in June
According to data from the Bank of England, UK mortgage approvals jumped to 54,662 in June 2023. This was up from 51,143 in May and the highest level since October 2022.
The increase in mortgage approvals was driven by a number of factors. One factor was the fact that house prices have been rising in recent months. This has made it more attractive for people to buy a home, as they can expect to see their investment appreciate in value.
Another factor that may have contributed to the increase in mortgage approvals is the fact that interest rates have been rising. This has made it more expensive to borrow money, but it has also made fixed-rate mortgages more attractive. This is because fixed-rate mortgages offer borrowers a guaranteed interest rate for a set period of time, which can provide peace of mind in a rising interest rate environment.
Consumer Credit Grows at Fastest Pace in Five Years
In addition to the increase in mortgage approvals, consumer credit also grew at its fastest pace in five years in June 2023. Net unsecured lending to consumers rose by £1.4 billion, the most since February 2018.
The increase in consumer credit was driven by a number of factors. One factor was the fact that people are spending more money on goods and services. This is likely due to a number of factors, including the fact that the economy is recovering from the COVID-19 pandemic and that people have more disposable income.
Another factor that may have contributed to the increase in consumer credit is the fact that people are taking out more loans to finance big-ticket purchases, such as cars and furniture. This is likely due to the fact that interest rates are still relatively low, making it more affordable to borrow money.
Reasons for the Increase in Mortgage Approvals and Consumer Credit
There are a number of reasons why mortgage approvals and consumer credit have increased despite the higher interest rates. These reasons include:
The desire to lock in a fixed-rate mortgage before interest rates rise further.
The belief that house prices will continue to rise, making it a good time to buy a home.
The increase in disposable income, which has made it more affordable to borrow money.
The desire to finance big-ticket purchases, such as cars and furniture.
Implications of the Increase in Mortgage Approvals and Consumer Credit
The increase in mortgage approvals and consumer credit has a number of implications. These implications include:
The housing market may continue to strengthen in the near term.
The economy may grow at a faster pace than expected.
Inflation may rise further.
The Bank of England may need to raise interest rates more aggressively.
Conclusion
The increase in mortgage approvals and consumer credit is a sign that the UK economy is recovering from the COVID-19 pandemic. However, it is important to note that these figures are still below pre-pandemic levels. It remains to be seen whether the housing market and the economy will be able to sustain this momentum in the face of rising interest rates.
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