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MNI (London)
By David Robinson
     LONDON (MNI) - Bank of England money and credit data showed mortgage
approvals and average interest rates on fixed rate mortgages both fell in
November, highlighting the weakness in demand.
     The following are key points from the data sets:
     --Quoted, or shop window, mortgage rates declined in December, underscoring
the fact that after the 25 basis point Bank Rate hike last August borrowing
costs have declined, not risen. The UK mortgage market is dominated by
short-term fixed rate products. The BOE data showed 2-,3- and 5-year 75%
loan-to-value mortgages all saw their quoted rates fall in December from
November, by 2, 1 and 2 basis points respectively. The 1.73% average interest on
a 2 year 75% LTV mortgage was down from 1.75% in August and on a 3 year 75% LTV
the 1.81% rate was down from 1.82%.
     --Mortgage approvals, a reliable guide to future housing market activity,
have been drifting lower. The 63,793 approvals recorded in December were below
the 63,952 in November and from the previous peak of 67,029 in October last
year. As mortgage rates have dipped these data support the view that demand is
weak.
     --Consumers are not funding purchases through accelerating unsecured
borrowing. Net consumer credit increased stg687 million in December, down from
stg958 million in November and the weakest since March last year. The series
high was stg2.238 billion in January 2005, which demonstrates just how subdued
borrowing now is compared to pre-financial crisis levels.
     --Broad money growth excluding economically irrelevant intra-financial
sector lending continued to expand in December. M4 excluding intermediate other
financial corporations was up 2.5% on the year or 4.3% on a three month
annualised basis - but these again are relatively modest increases.
     --One apparently encouraging factor was that overseas demand for gilts was
strong in December. Net overseas gilt purchases of stg11.960 billion were the
highest since August.
--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: M$B$$$,M$E$$$,M$$BE$]
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com