U.K. Mortgage Lending hits 6-Month High in May

U.K. mortgage lending grew in May at the fastest pace in six months, official figures showed Monday, a fresh sign Britons are once again keen to invest in property.

Lending secured on dwellings increased by 2.1 billion pounds ($3.3 billion) during the month, the Bank of England said, the largest rise in a single month since November last year.

By contrast, the number of mortgage approvals for house purchase actually slowed in May to 64,434 from 67,580 in April, although these figures are more forward-looking and tend to be revised afterwards.

Nevertheless, a barrage of indicators has recently suggested the British housing market is ready to pick up some steam. House prices rallied during the first months of 2014 but then slowed, due in part to the introduction of more stringent mortgage regulation that forced banks to keep closer tabs on the credit-worthiness of their clients.

Surveys by the Royal Institution of Chartered Surveyors, as well as data on house prices, have consistently reported that Britons are increasingly willing to invest in dwellings.

“We expect support for housing market activity to come from current very low (in some cases record low) mortgage rates, strengthening earnings growth, rising employment and elevated consumer confidence,” said Howard Archer, economist at IHS Global Insight, in a research note Monday.

A recent cut in taxes on property purchases is also likely to be a boon for the housing market, analysts say.

Economists note that higher property prices usually drive homeowners to feel richer and ramp up spending, which in turn fuels economic growth. However, Bank of England Governor Mark Carney has often voiced concerns about the dangers that a housing bubble would pose for the U.K. recovery.

Lending to consumers actually slowed in May to GBP1 billion from GBP1.2 billion in April, the Bank of England said, due to a slowdown in credit card lending.

Source: MarketWatch