MNI 5 Things: Mortgage Approvals, Mortgage Interest Rates Up

By Jai Lakhani and David Robinson

     LONDON (MNI) - The following are the key points from the May money and

credit data release published Friday by the Bank of England:

     - The cost of mortgage borrowing is heading higher, with the average rates

quoted by lenders at their highest levels since 2016. BOE data showed that the

rate on the 2 year 75% loan-to-value (LTV) mortgage was 1.74% for May, up from

1.70% and the highest since June 2016 and for a 2 year 85% LTV, the highest

since May 2016. The quoted (shop-window) rates are a leading indicator and

suggest borrowing will be more expensive in the months to come.

     - Mortgage approvals ticked up in May 2.5% to 64,526, up from 62,941 in

April and above the six-month average of 63,803. With borrowing costs set to

rise, its questionable whether this improvement will be sustained.

     -Unsecured borrowing remains fairly volatile on a month-to-month basis with

net consumer credit dropping slightly in May to stg1.405bn from stg1.764bn in

April but up from stg428mn in March. The May figure was however at the six month

average of stg1.4bn. The volatility appears to be stemming from other loans

which included motor finance.

     -Business borrowing surged in May but this was driven in part by merger and

acquisition (M&A) activity. The amount raised from banks and financial markets

increasing by stg8.9bn, similar to July 2017. The BOE said this was driven by a

record stg11bn net bond issuance which reflected the M&A activity.

     -Loans to non-financial businesses fell by stg1.0bn in May. This was a

second consecutive fall with April's stg2.8bn fall representing the lowest net

change since August 2017. The fall in May was driven by loans to large

businesses falling whilst loans to SMEs in May was flat. This is mirrored by Q1

GDP reporting the first fall in business investment since Brexit.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: MABDS$,MAUDR$,MAUDS$,M$B$$$,M$E$$$,M$U$$$]