Mortgage Lending (Dec.) - Capital Economics
UK Housing

Mortgage Lending (Dec.)

UK Housing Market Data Response
Written by Gabriella Dickens

Improving sentiment pushed house purchase mortgage approvals to a 29-month high in December. But Boris Johnson’s election win has done nothing to improve the housing market fundamentals. With house prices very high and interest rates at their floor, the prospects for further growth in lending are limited.

House purchase lending recovers in December

  • Improving sentiment pushed house purchase mortgage approvals to a 29-month high in December. But Boris Johnson’s election win has done nothing to improve the housing market fundamentals. With house prices very high and interest rates at their floor, the prospects for further growth in lending are limited.
  • According to the Bank of England, mortgage approvals for house purchase rose from 65,514 in November to 67,241 in December – the highest level since early 2017. (See Chart 1.) That pushed the annual rate of growth up to over a two-year high of 4.2% y/y.
  • This result is not too surprising given mounting evidence of a so-called “Boris-bounce”. Indeed, an upturn in sentiment following the decisive general election result seemed to have caused a flurry in activity. According to the Nationwide, house price growth jumped to a 14-month high in December. And, having surged to a six-year high at the end of last year, the RICS new buyer enquiries balance shows a strong rise in effective demand.
  • But while the general election result has boosted sentiment, and therefore demand, we doubt it will translate into a sustained increase in mortgage lending in the coming months. After all, sentiment might have improved in the short run, but with Boris Johnson’s pledge not to extend the transition period past 31st December, uncertainty may intensify later this year.
  • And in any case, December’s election result has done nothing to ease deposit constraints for buyers, loosen credit conditions or make houses more affordable. With the housing market still constrained by these fundamentals, we doubt that the latest pick-up in lending is the start of a new, upward trend.

Chart 1: Mortgage Approvals for House Purchase (000s per Month)

Source: Bank of England

Table 1: Bank of England Mortgage Lending – Key figures

2018

2019

Seasonally adjusted

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Value of loans approved £bn

21.1

22.4

22.0

21.6

21.8

21.7

21.9

22.1

22.3

22.4

22.3

22.8

23.2

%y/y

1.6

5.7

5.6

5.3

3.5

-0.3

0.4

6.1

-0.6

3.1

2.7

6.3

10.1

Approvals for House purchases 000s

64.3

66.8

65.8

62.5

66.1

65.4

66.2

67.1

65.7

66.0

65.0

65.5

67.2

%m/m

-0.3

3.9

-1.4

-5.1

5.8

-1.0

1.2

1.3

-2.0

0.5

-1.5

0.8

2.6

%y/y

4.0

-0.2

2.9

-1.8

3.9

0.6

0.9

3.4

-0.7

0.7

-2.8

2.2

4.2

Source: Bank of England


Gabriella Dickens, Assistant Economist, 020 3974 7421, gabriella.dickens@capitaleconomics.com