UK mortgage lending resumes after tax break blip, consumers cautious
Reuters
Published Sep 29, 2021 04:47AM ET
Updated Sep 29, 2021 05:31AM ET
By William Schomberg
LONDON (Reuters) - British mortgage lending rose last month, recovering from a rare fall in July which was linked to the scaling back of a tax break for homebuyers, but consumers remained cautious about their borrowing, Bank of England data showed on Wednesday.
Net mortgage lending increased by 5.293 billion pounds ($7.24 billion) in August, bouncing back from July's net repayment of 1.758 billion pounds. New mortgage approvals fell slightly to 74,453.
A Reuters poll of economists had pointed to a net rise of 3.7 billion pounds in mortgage borrowing in August and to 73,000 mortgage approvals during the month.
Britain's housing market has boomed since the summer of 2020, helped by a pandemic surge in demand for bigger properties as more people work from home and by the tax incentive offered by finance minister Rishi Sunak.
That incentive was halved in scale on July 1 for home-buyers in England and Northern Ireland and is due to expire completely at the end of this month. Similar tax breaks in Scotland and Wales have already ended.
Wednesday's data showed consumer borrowing also rose in August, increasing by a net 351 million pounds after a rise of just 32 million pounds in July. The economists polled by Reuters had expected a smaller rise of 300 million pounds.
Nonetheless, consumer credit was 2.4% lower than in August 2020, underscoring how many households remained cautious about their spending over the summer when COVID-19 cases picked up again and many people were required to isolate at home.
Economists say further momentum is likely to be lost in the coming months due to rising inflation and supply chain problems linked to the reopening of the economy, chief among them a lack of truck drivers which is hampering fuel supplies.
"Overall, we're becoming more worried that economy may soon take a step back," Paul Dales, an economist at Capital Economics said. "That would be food for thought for the Bank of England which appears intent on raising interest rates in the coming months."
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Written By: Reuters
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