U.K. Mortgage Approvals Hit 13-Year High on Tax-Fueled Boom

(Bloomberg) -- U.K. mortgage approvals hit a 13-year high in August as the housing market extended its tax-cut fueled mini boom.

Lenders signed 84,715 home-loan agreements, the most since October 2007, the Bank of England said Tuesday. Demand for unsecured credit slowed following a strong July.

The 28% surge in approvals over the month reflects homebuyers seeking to tie up deals after Chancellor of the Exchequer Rishi Sunak waived tax on the first 500,000 pounds ($642,000) of any property purchase as part of a package of stimulus measures announced in July. Prices also jumped, surveys show.

Real-estate agents are warning, though, that the boom could prove short-lived, with unemployment expected to surge later this year as government wage subsidies are significantly scaled back.

Average house prices will fall by nearly 14% next year, according to the Centre for Economics and Business Research.

Consumer credit rose 300 million pounds in August, well down on the 1.1 billion pounds borrowed in July after Britons freed from many restrictions went on a spending spree. Borrowing fell 3.9% from a year earlier, the most since records began in 1994, reflecting significant repayments of debt during the early part of the lockdown.

Borrowing cost on overdrafts and personal loans rose during the month, despite the BOE keep the benchmark interest rate at a record low, the figures show.

Small and medium-sized enterprises took out an extra 2.2 billion pounds of debt in August, taking advantage of government-guaranteed loan programs designed to help struggling companies weather the coronavirus crisis. It took the annual growth rate to 21.8%, the highest on record. Larger non-financial firms also resumed borrowing after months of repayments.

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