(Bloomberg) —
U.K. mortgage approvals dipped for a third month in August in a sign that housing-market activity is returning to more normal levels following a pandemic-driven boom.
Banks and building societies authorized 74,453 home loans compared with 75,126 in July, Bank of England data published Wednesday show. That was slightly stronger than the 73,000 figure economists had expected. Unsecured lending to consumers rose marginally.
The fall in mortgage approvals partly reflects the scaling back of a 15,000-pound ($20,300) tax cut on property purchases on July 1. The stamp-duty holiday plus demand for larger homes away from city centers sent house prices and transactions to record levels.
However, approvals remain above their pre-pandemic levels, pointing to resilient underlying demand. Recent surveys suggest the “race for space” is set to persist as working from home becomes the new normal for many. Other factors underpinning the market include low borrowing costs, a lack of homes for sale, savings accumulated during lockdowns and a robust jobs market.
Tax incentives are also continuing to play a part, with people who complete their purchases by tomorrow in line to save as much as 2,500 pounds in transaction costs. Stamp-duty thresholds revert to their pre-pandemic levels on Oct. 1.
Lenders advanced a healthy 5.3 billion pounds of mortgage debt on balance in August — more than economists forecast — after a slump in July following the tapering of tax relief.
The BOE data showed that consumer credit rose by 351 million pounds in August. The limited increase reflects poor retail sales during the month and reduced car sales, with automakers facing shortages of semiconductor chips.
Households deposited an additional 9.1 billion pounds with banks and building societies in August. That’s almost double the average inflow of 4.7 billion pounds in the year prior to the pandemic, adding to evidence that consumers are holding onto savings they accumulated during lockdowns instead of spending.
(Adds chart, actual mortgage lending in sixth paragraph)
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