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London - UK mortgage approvals fell to a seven-month low in a sign the housing market is slowing, though Britons are continuing to take advantage of low interest rates to take on unsecured debt.
Lenders approved 64 645 home loans in April, the fewest since September and below the median forecast in a Bloomberg survey. Mortgage lending grew £2.7bn, the least since April 2016, the figures from the Bank of England (BoE) show.
But consumer credit rose £1.5bn, little changed from the previous month, pushing annual growth to 10.3% from 10.2%.
The fall in mortgage approvals is consistent with the slowdown in the housing market seen in recent months. Prices declined 0.2% in the three months through April, their first quarterly decline in more than four years, according to lender Halifax.
The unsecured-lending data suggest consumers may be relying on cheap debt to finance their spending as faster inflation eats into their purchasing power, a worry for BOE financial-stability officials. Regulators reviewing into consumer borrowing after warning this year about a potentially unsustainable buildup of debt.
“Appetite for unsecured loans remains historically high and is outpacing growth in household incomes,” said Niraj Shah of Bloomberg Intelligence. “That could pose problems for the banking industry if an economic downturn leads loan defaults to increase.”
In a separate report Wednesday, GfK said the full impact of the squeeze on purchasing power has “yet to hit home” after its monthly index of confidence rose modestly this month.
With Brexit talks looming, over-indebted households could cut back on their spending should their economic circumstances change, Shah said. The biggest risk of default risk stems from vehicle finance, with the Finance & Leasing Association reporting that 87% of new car sales were funded by its members in the 12 months to March.
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