In November, the UK experienced an unexpected drop in mortgage approvals, reaching their lowest in three months, alongside a substantial slowdown in consumer credit growth, marking the weakest pace in over two years. This trend supports the notion that the economy may have stagnated towards the end of the year.
According to data released by the Bank of England on Friday, the number of mortgage approvals decreased to 65,720 in November from 68,129 in October, contrary to the anticipated rise to 69,000. Despite this decline, approvals remained above the twelve-month average of 60,400.
The effective interest rate, reflecting the actual rate paid on newly drawn mortgages, dipped by 11 basis points to 4.50 percent, the lowest level since April 2023. Concurrently, mortgage lending fell by £1.0 billion to £2.5 billion in November, following a £1.0 billion increase in October.
Consumer credit growth also showed signs of easing, dropping to its slowest annual pace since June 2022. It recorded a 6.6 percent increase compared to 7.3 percent in October, with consumer credit slightly falling to £0.9 billion in November, down from £1.0 billion in the previous month.
Household deposits with banks and building societies rose by £0.2 billion in November, while business borrowings from banks increased to £6.0 billion. According to Nationwide Building Society's latest report, house prices accelerated at a quicker rate, advancing by 4.7 percent in December, thus concluding the year strongly.
Robert Gardner, Chief Economist at Nationwide, highlighted that upcoming stamp duty changes are expected to introduce market volatility as buyers expedite purchases to evade higher taxes. However, he asserted that the fundamental pace of the housing market's activity will continue to strengthen gradually.
In December, the Bank of England opted to maintain its interest rates steady, with policymakers advocating for a gradual approach to easing policy restrictiveness. Bank staff forecasted zero economic growth for the fourth quarter, a revision from the 0.3 percent growth projected in November.
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