UK mortgage approvals hit best level in two years

UK mortgage approvals hit their highest level in July since February 2017, according to figures released by UK Finance on Tuesday.

Mortgage approvals rose to 43,342 from 42,775 in June, beating expectations for an increase to 42,800. On the year, mortgage approvals were up 10%.

Meanwhile, credit card spending pushed up 8.2% on the year in July, while borrowing was 3.8% higher.

Howard Archer, chief economic advisor to the EY Item Club, said it's possible that mortgage activity is being lifted by some people looking to complete their house purchases before the Brexit deadline on 31 October.

"Improved earnings growth in tandem with current record high and rising employment may also be providing some help to housing market activity," he said. "Nevertheless, house prices remain soft on most measures and look unlikely to rise by more than 1.5% this year."

He said that if the UK leaves the EU with a deal in October, reduced uncertainty and modestly improved economic growth will provide some help to the housing market and see prices rise around 2% in 2020. However, in the event of a no-deal Brexit, house prices could quickly fall by around 5%.

Capital Economics said the rise in mortgage approvals should be "interpreted with care".

"It probably reflects lenders competing for market share, rather than a market-wide recovery in lending," it said. "Looking ahead, high house prices and uncertainty will keep the outlook for lending weak. We think that mortgage approvals will see a 1% fall in 2019, even if a Brexit deal is reached. And lending is likely to see a much steeper fall if the UK were to leave the EU without a deal in October."