UK mortgage approvals unexpectedly rose in May

According to the report from the Bank of England, net mortgage borrowing rebounded to £6.6 billion in May from £3.0 billion in April, but remained below the record £11.4 billion in March. Mortgage approvals for house purchase were 87,500 in May, up very slightly from 86,900 in April, but lower than the recent peak of 103,200 in November 2020. Economists had expected a decrease to 85 900.

For the first time since August 2020, consumers borrowed more as consumer credit than they paid off in May. Net borrowing was £0.3 billion. The effective rate on new personal loans remained low at 5.61%, compared to 7.03% in January 2020.

Households’ net flow in to deposit accounts fell again in May, to £7.0 billion. Deposit interest rates fell slightly to new historically low levels.

Large businesses made net repayments of £1.9 billion of loans in May, with small and medium sized businesses also making their first repayment, of £0.4 billion, in over a year. Private non-financial companies raised £0.6 billion of finance from capital markets in May, compared to a monthly average net issuance of £3.3 billion since March 2020.