New mortgage approvals slump in December raising fears for housing market

There were only 36,115 approvals last month, the lowest since April 2013

House prices in November were up 5.1 per cent on the same month the previous year (PA)

Mortgage approvals by UK banks slumped dramatically in December according to the latest data from providers, raising fresh concerns about the direction of the housing market.

UK Finance reported that there were only 36,115 approvals last month, down from 44,476 in the same month in 2016 and the lowest since April 2013.

The reading follows a weak report on new-buyer enquiries and agreed sales in December from the Royal Institution of Chartered Surveyors.

“The deterioration in consumers’ confidence, driven by the squeeze on real incomes and the November interest-rate hike, has taken a heavy toll on the mortgage market,” said Samuel Tombs of Pantheon Macroeconomics.

“The [bank’s Monetary Policy Committee] has seriously misjudged the ability of the housing market to withstand even modest increases in interest rates.”

“We expect the housing market to remain very weak this year, with house prices merely holding steady.”

According to the Office for National Statistics, house prices in November 2017 were up 5.1 per cent on a year earlier, down from a growth rate of above 8 per cent at the time of the Brexit vote in 2016.

The latest reading from the Nationwide Building Society showed an average price-growth of 2.6 per cent in December, down from 4.5 per cent a year earlier.

Lowest since April 2013

UK Finance also reported that Britons put an additional £10.1bn on their credit cards in December, with the annual growth-rate in borrowing at 5.3 per cent, unchanged from November.

However, overall consumer-credit growth slowed to 0.7 per cent, down from 0.8 per cent in November and a peak of 2.9 per cent in April.

The Bank of England has warned about the potential threat to financial stability posed by the rapid growth in consumer credit in recent years.

“The Bank of England will be pleased with the slowdown in consumer credit in December and will be looking for a continuation of this trend in 2018,” said Howard Archer of the EY Item Club.