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Net mortgage approvals rose by more than expected in May, according to Bank of England data on Thursday.
Individuals repaid, on net, around £100 million of mortgage debt in May. In April, net repayments had been £1.5 billion - a record amount, if the early stages of the Covid pandemic are excluded.
Net mortgage approvals rose to 50,500 in May from 49,000 in April, which was higher than FXStreet-cited market consensus of 49,700.
Remortgaging approvals rose to 33,600 from 32,500, the BoE noted.
The effective interest rate on newly drawn mortgages, meaning the actual interest rate paid, rose to 4.56% in May from 4.46% in April.
The BoE’s own benchmark interest rate is currently 5.00%, following a 50 basis point hike in June. However, it was 4.50% from May 10, and 4.25% for the first 10 days of the month.
The BoE noted individuals borrowed £1.1 billion in consumer credit in May, compared to £1.6 billion the month before.
‘The additional consumer credit borrowing in May was split between £600 million of borrowing on credit cards and £500 million billion of borrowing through other forms of consumer credit (such as car dealership finance and personal loans,’ it said.
Whilst consumer credit borrowing fell, UK households withdrew a record amount from banks and building societies in May.
On net, households withdrew £4.6 billion, which was the highest level since records began in 1997.
The combined net flow of both household deposits with banks and building societies and National Savings & Investment accounts was negative £3.8 billion, a significant fall from £5.3 billion.
‘This provides strong evidence that households are dipping into excess savings built up during the pandemic (estimated to be circa. £200 billion) to sustain living standards during the current cost of living squeeze caused by the high inflation environment,’ said Daniel Mahoney, UK economist at Handelsbanken.
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