Despite growth in lending, UK mortgage approvals dive down

Contrary to economists' expectations, the number of approvals in UK mortgages suddenly dropped in September for the first time in the past four months. The mortgages rose significantly in August indicating the highest level since early 2014.

The net mortgage lending registered its peak volume in September since 2008. Despite the number of approvals declining, the housing market in the UK still showing undercurrent potential. According to Nationwide Building Society, the house-price growth is picking up in October.

The number of approvals fell to 68,874 in September from 70,664 in August, according to Bank of England (BoE).

Economists predicted there would be an increase in the number of approvals. Though it fell from the previous month, the September data is still showing above average over the previous six months.

Net mortgage lending grew GBP 3.6 billion in September, registering the highest level since 2008.

The UK's housing market is showing signs of buoyancy in the wake of lower interest rates propelling more demand. The new supply levels in the housing market are not matching the way demand is growing.

The overall lending rate rose at the highest level since December 2008 indicating an encouraging level of approvals and booming consumer confidence. With annual growth of 8.2 percent, consumer credit also surpassed market expectations registering the fastest growth since January 2009.

The British economic growth during the past three months exceeded the forecasts and economists are unsure whether the latest growth level will continue. And also economists point that the strong consumer demand may or may not offset the weakening global outlook.

Nationwide Building Society said the house -price growth is encouraging in October taking the annual growth rate at 3.9 percent from 3.8 percent. The property values are also moving upwards consistent with earnings growth.

The mortgage approvals dipped in September for the first time since May this year. Howard Archer, Chief UK and European economist at IHS Global Insight, said: "The dip in mortgage approvals in September could possibly reflect recent modestly reduced expectations of a near-term rise in interest rates."

Robert Gardner, Chief Economist at Nationwide Building Society, said: "While this bodes well for a sustainable increase in housing market activity, much will depend on whether building activity can keep pace with increasing demand."

The lending to businesses dropped to GBP 938 million in September. Loans to small and medium-sized companies (SME) rose 0.3 percent to GBP250 million, according to the BoE report.