Mortgage approvals show drop-off
Mortgage approvals have dropped off further from a two-year high seen earlier this year, fuelling speculation that house prices are likely to soften in the coming months.
There were 51,098 mortgage approvals for house purchase in May worth £7.6 billion, the lowest figure since March and significantly down on a 25-month high in January, Bank of England figures showed.
At the beginning of this year, lenders and estate agents reported a rush of first-time buyers trying to beat a two-year stamp duty exemption deadline, which ended in March.
There were 58,728 loan approvals for house purchase in January, and lenders have said that the deadline had the effect of bunching up sales which would have otherwise happened later this year.
Lenders are expected to continue a trend seen in recent months of tightening their borrowing criteria and raising their mortgage rates amid the weak economy and the ongoing eurozone crisis, making it tougher for people to take out a mortgage.
The number of approvals for re-mortgaging also fell back in May, to 29,244 loans worth £4 billion, the lowest number of loans since February.
Consumers also made high mortgage repayments, at £11.7 billion in May, compared with the previous six-month average of £11.6 million, continuing a determination to pay down their debts amid the mood of caution.
Howard Archer, chief UK and European economist at IHS Global Insight said: "Mortgage approvals have hovered around 50,000 since January.
"This indicates that underlying housing market activity remains weak following a limited boost to housing activity in late-2011/early-2012 from first-time buyers looking to complete before the stamp duty concession ended on March 24.
"The ongoing muted mortgage activity reported by the Bank of England maintains our suspicion that house prices are likely to drift lower over the second half of 2012 and are likely to fall by around 3% from current levels."
Consumer credit, which includes personal loans, overdrafts and credit cards, increased by £732 million in May, the biggest rise since March. This follows an increase of £379 million in April.
Melanie Bowler, an economist at Moody's Analytics said that despite the uplift in the consumer credit figures, caution on the part of both lenders and borrowers was keeping lending figures low.
She said: "While banks are reluctant to lend amid fear of default, households are favouring paying down debt rather than taking on new borrowing."
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