Net mortgage approvals for house purchases decreased more than expected in April, while consumer borrowing from credit cards increased.
Data from the Bank of England showed mortgages for house purchases fell 3,100 in April compared to March. Net mortgage pprovals dipped to 60.46K from a revised down 63.6K, lowert than the 62.8K forecast for April.
Net borrowing of mortgage debt by individuals decreased sharply by £13.7 billion to an overall negative figure of -£0.8 billion in April, following an increase in net borrowing by £9.6 billion in March.
Net borrowing of consumer credit by individuals was £1.6 billion in April, up from £1.1 billion in the previous month, including borrowing through credit cards increasing to £0.8 billion from £0.4 billion.
The BoE data also shows the 'effective' interest rate on newly drawn mortgages – the actual interest paid – slightly decreased in April to 4.49%. However, the average interest rate on outstanding mortgages increased to 3.86% from 3.84%.
Alice Haine, analyst at Bestinvest, notes that the BoE's indicator of future borrowing fell for the fourth consecutive month, while net mortgage borrowing plunged as the short-term surge in buyers racing to get deals completed before the stamp duty threshold changes took effect, dropped off.
"April was too late to secure a mortgage and complete a residential property purchase before the thresholds reverted to the previous lower level, so any buyers pushing ahead with a purchase that month would have already accepted the higher costs."
She says uncertainty in the wider economy is "likely to have also played a part" in the softer mortgage approval data, a result of inflationary pressures in the domestic economy in ‘Awful April’ when households were hit with a raft of bill hikes and the sharp increase in employment costs for businesses.
This comes on the same day that the housing market was shown by Nationwide data to have remained resilient with prices rising 0.5% on the month in May.
With four interest rate cuts from the BoE's monetary policy committee since August last year, Haine says it remains unclear whether May’s rate cut will be followed with another cut in June -- "though as persistent inflation and the sharp rise in the minimum wage may encourage the BoE to stick with the status quo".