The number of new mortgages approved by U.K. lenders fell to a near three-year low in the final month of 2017, new data showed, suggesting the ongoing consumer squeeze as well as higher borrowing costs have cooled Britain’s housing market.
The Bank of England said Tuesday there were 61,039 new home loans approved in December, down from 64,712 the previous month and the lowest number since January 2015.
Potential house buyers in the U.K. are facing a double whammy of above-target inflation, which in the past months has exceeded growth in wages and eroded their spending power, as well as the recently increased interest rates.
U.K. rate setters raised borrowing costs for the first time in a decade in November, withdrawing an emergency cut enacted in the wake of the 2016 Brexit vote. The benchmark interest rate now stands at 0.5%, up from 0.25% previously.
Britons’ decision to leave the European Union caused a sharp depreciation in sterling, which in turned began to fuel price growth. Inflation has recently slowed, but at 3% remains significantly above the BOE’s 2% target.
Consumer credit, a measure of unsecured debt which includes credit cards, overdrafts and personal loans, increased by 1.5 billion pounds ($2.1 billion) net of repayments, the same as the previous month.
Source: Dow Jones