Uncertain political climate cools mortgage approvals

Mortgage approvals fell to a seven-month low in October, as political uncertainty dented the UK housing market.

According to UK Finance, the banking sector's trade body, gross mortgage lending across the residential market eased 0.9% year-on-year in October to £25.5bn. House mortgage approvals by the main high street banks fell to 41,219 in October, from 42,216 in September. Analysts had expected approvals to be largely unchanged month-on-month.

On a year-on-year basis, mortgage approvals for home purchases by the main high street banks were 3.0% higher, while remortgage approvals jumped 12.7%. Approvals for other secured borrowing dipped 2.1%, however.

Samuel Tombs, UK chief economist at Pantheon Macroeconomics, said: "The return of mortgage approvals to their 12-month average in October likely partly reflected would-be buyers deferring purchases until the political outlook becomes clearer.

"Approvals should pick up again, if the Conservatives win a majority and pass the Withdrawal Agreement Bill by 31 January, as now looks likely. After all, the recent sharp decline in mortgage rates has been home-ownership much more attractive."

Marc von Grundherr, director of estate agents Benham and Reeves, said: "Buyer demand in the way of mortgage approvals has remained consistent despite the wider market uncertainty, but these certainly aren’t the worst set of figures considering the wider landscape and the seasonal influence that slows the market in the lead up to Christmas.

"The good news is that people are still buying homes, despite the political paralysis, and while we may have a long winter ahead, there are plenty of positives to take."

UK Finance also reported on Tuesday that there was £11.0bn of credit card spending in October, 2.3% lower year-on-year, but repayments remained in line with spending. Personal borrowing through loans was 7.4% higher, while the decline in borrowing through overdrafts continued, down 1.2%.

Personal deposits grew by 2.1% in the year to October 2019.

UK Finance represents more than 250 firms across the banking and finance industry.