Modest increase in mortgage approvals, but we are still down on late-2011 levels - ITEM Club comments on today's lending data
Andrew Goodwin, senior economic advisor to the EY ITEM Club, comments on today’s lending figures:
- A modest increase in mortgage approvals, but still down on late-2011 levels
- Increased remortgaging activity reflects impending increases in SVRs
- Weaker credit card lending linked to poor weather-related retail sales
“While the April mortgage approvals figures are a little stronger than the previous month, they are nothing to write home about. Activity is still down on the levels reported at the end of last year. However, it is heartening that at least we haven’t yet seen any evidence of the sharp tightening in mortgage availability which the latest Credit Conditions Survey had predicted.
“The April data shows evidence of greater remortgaging activity, which we attribute to the fact that several lenders had announced increases in their Standard Variable Rate (SVR) to come into effect in early May, encouraging homeowners to seek a better deal. This trend could continue for several months and it is also conceivable that the higher cost of borrowing will dampen levels of house buying.
“We would expect to see housing activity softening or, at best, remaining flat for the rest of the year, with prices continuing to drift downwards. Even if the UK banking system is not badly affected by the ongoing problems in the Eurozone, we are unlikely to see any significant loosening of credit conditions in the near future and the wider economic backdrop remains unsupportive.
“We suspect that the net repayment of credit card lending merely reflects April’s poor retail sales figures. Clearly the poor weather kept consumers away from the shops and we would expect to see this reversed in May, although in a wider historical context lending flows remain very weak.”