Mortgage approvals down 10% but confidence remains 'robust', says report
The number of mortgages approved to home-buyers was 10% lower in October than a year earlier, according to a high street banking report.
But the British Bankers' Association (BBA) said consumer confidence remained "robust" - with consumer credit growing at its fastest rate in a decade.
BBA figures showed 40,851 mortgages were approved for house purchase in October - about 10% lower than the 45,352 approvals seen in October last year.
But October's figure was still the highest in five months.
The BBA said across the first 10 months of this year, house purchase approvals were running 4% lower than in the same period in 2015.
Samuel Tombs, c hief UK economist at Pantheon Macroeconomics, said the figures show that recent falls in mortgage rates had resulted in a very modest increase in mortgage borrowing.
He said: " Approvals will struggle to rise further in the near-term, given that mortgage rates will start to edge up soon."
Mr Tombs said swap rates, which lenders use to price their mortgages, have rebounded over the past two months.
He said: " In addition, the impending stagnation of households' real incomes, driven by soft employment growth and high inflation, suggests that mortgage approvals will remain depressed next year.
"On top, changes to the tax treatment of mortgage interest payments for buy-to-let investors in April will dampen lending too."
Meanwhile consumer credit, which includes borrowing on personal loans, overdrafts and credit cards, was showing annual growth of over 7% - the highest rate seen since 2006.
Rebecca Harding, the BBA's chief economist, said: "Consumer credit is now growing at its fastest rate since November 2006, reflecting strong retail sales growth. Consumer confidence remains robust as borrowers take advantage of record low interest rates."
Howard Archer, chief UK and European economist at IHS Global Insight, said: "I t looks inevitable that the fundamentals for consumers will progressively weaken over the coming months, with inflation rising markedly due to the weakened pound and companies likely increasingly looking to hold down pay to limit their total costs."
The report also showed that lending to non-financial companies increased by £1.4 billion in October, following a £276 million fall the previous month.
Mr Archer said: "There remains the concern that businesses will become increasingly cautious in their behaviour, especially investment, over the coming months due to heightened uncertainty as the UK's Brexit process gets under way."