Mortgage lending rises as Brits stash the cash
Despite growing economic uncertainty and rising pessimism about the state of the UK housing market, last month was brilliant for mortgage lending.
The latest official figures show that British lenders approved the most mortgages in October in more than 13 years.
According to the Bank of England, this mortgage lending boon was part of the post-Covid lockdown bounce-back in the housing market.
Despite what looks on the surface to be a positive set of figures, there are still concerns about day-to-day borrowing among many consumers, especially with the onset of a second national lockdown.
The Bank of England figures show that mortgage approvals for house purchases rose to 97,532 in October, up from 92,091 in September.
The number of mortgage approvals for house purchases was higher than economists expected.
One factor driving the recovery of the UK housing market during the pandemic is a desire to live in larger properties and also a wish to live in more rural parts of the country, away from City life during a lockdown.
Government policy is also supporting housing market activity, with a stamp duty holiday for purchases up to £500,000 in place until March next year.
Despite this renewed housing market activity, the broader economic situation does not appear to support sustained growth in house prices.
The latest official forecasts suggest unemployment will continue to rise, before peaking in the middle of next year.
The Bank of England data also revealed that net consumer lending fell by £590 million pounds compared to a month earlier, with much of this fall the result of consumers repaying credit card debt.
Consumer lending was 5.6% lower when compared to October last year, which is the most significant fall in consumer lending since records began in 1994.
Less borrowing could have repercussions for economic recovery as we head out of the lockdown, as consumers are likely to have less disposable cash to spend in the shops.
As well as repaying debt, it seems we are saving more in cash, with household savings rising by £12.3 billion in October, its largest monthly increase since May.
Alistair McQueen, head of savings and retirement at insurer Aviva, said:
A reduction in the use of consumer credit and another increase in savings suggests many are bracing themselves for further economic uncertainty.