(Updates with comment from economist in fourth paragraph.)
June 1 (Bloomberg) -- U.K. mortgage approvals fell in April to the lowest in four months as rising jobless claims undermined consumer confidence and an extra public holiday for the royal wedding slowed house purchases.
Lenders granted 45,166 loans to buy homes, compared with a revised 47,145 the previous month, the Bank of England said today in London. The April figure is the lowest since December. Economists forecast a decline to 47,000 from an initially reported 47,557 in March, based on the median of 18 economists in Bloomberg News survey.
Hometrack Ltd. said this week it expects house prices to fall about 1 percent this year as Britons find it harder to get home loans. The property market may come under further strain as Prime Minister David Cameron’s government implements the deepest spending cuts since World War II and inflation at more than double the Bank of England’s 2 percent target pushes some policy makers to call for higher interest rates.
“Given the pressure the U.K. consumer is currently under, it is no surprise that housing demand remains exceptionally weak,” said Nida Ali, economic adviser to the Ernst & Young ITEM Club. “Historical trends suggest that mortgage approvals of about 45,000 are consistent with falling house prices.”
A separate report today showed an index of manufacturing fell more than economists forecast to a 20-month low of 52.1 in May from 54.6 in April. The gauge by the Chartered Institute of Purchasing and Supply had been forecast to fall to 54.1, according to the median of 26 estimates in a Bloomberg survey.
The pound erased its gain against the dollar after the reports and was at $1.6423 as of 10:42 a.m. in London, down 0.2 percent since yesterday.
U.K. mortgage approvals may have been partly held back in April by the two consecutive four-day weekends at the end of the month to mark Easter and the wedding of Prince William and Kate Middleton, said Howard Archer, an economist at IHS Global Insight in London.
Still, “modest falls in house prices are more probable than not over the coming months as tighter fiscal policy and the possibility of gradually rising interest rates before the end of 2011 maintains pressure on the housing market,” he said.
The Bank of England figures today showed net mortgage lending rose 739 million pounds ($1.22 billion) in April and gross lending amounted to 11.2 billion pounds. Consumer credit rose a net 504 million pounds in April. Credit-card lending increased 347 million pounds, the most since February 2010, while personal loans and overdrafts rose 157 million pounds.
Hometrack’s report this week showed that U.K. house prices fell 0.1 percent in May. Other reports last month were mixed. The Royal Institution of Chartered Surveyors said May 10 its house-price gauge rose to the highest level in nine months in April. Lloyds Banking Group Plc’s Halifax division said a day earlier prices fell 1.4 percent, the most in seven months.
U.K. unemployment claims rose at the fastest rate in 15 months in April, underlining the fragility of the economic recovery. Bank of England officials said last month that an interest-rate increase could damp consumer spending.
A measure of M4 money-supply growth that the central bank uses to assess the effectiveness of its asset purchases fell 2 percent in the three months through April on an annualized basis. The gauge excludes financial companies that specialize in intermediating between banks, such as holding companies and non- bank credit grantors. Total M4 rose 0.1 percent on the month and fell 0.9 percent on the year.
--With assistance from Mark Evans in London. Editor: Fergal O’Brien, Eddie Buckle
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