David Milliken

LONDON, (Reuters) – British banks and building societies gave the fewest mortgages to house buyers in over a year as the government was preparing to eliminate a tax exemption on home purchase.

Also, consumer lending slowed down more than predicted, which will increase some analysts’ worries that Britain is stalling its rapid recovery from COVID-19 lockdowns.

From 74,214 in the previous month, September saw 72,645 mortgage approvals. It was the lowest number since July 2020, when the government reduced stamp duty for all home purchases.

This tax cut was reduced in July, and ended in total at the end September. Before property purchases that were mortgage-financed in September would have had time to close.

Net mortgage lending in September rose to 9.524 Billion Pounds ($13.13 Billiod), the highest figure since June. It was also the most high level of net mortgage lending in the entire month.

Martin Beck (senior economic advisor, EY ITEM Club) stated, “The stamp duty holiday is highly distortionary. Transactions are brought forwards. This has led to frothiness and prices in the past year.”

According to official data, August saw a rise in house prices by almost 15% in the United Kingdom compared with before the pandemic. In the United States and Germany, where there was a rise in demand for space due to the pandemic, prices have seen huge increases.

Both net mortgage lending and mortgage approvals were greater than predicted by economists. However, the Reuters poll found that September’s growth in net consumer lending was less than half what economists anticipated at 234 million pounds.

Lending increased by 0.1% in August, the lowest monthly increase since March and 1.8% lower than its level one year ago.

Britain’s oldest-running survey of consumer confidence showed that October saw a drop in morale against an environment of high inflation, increased COVID-19 and fuel shortages at many stations.

Beck stated that consumer recovery would depend on increasing household borrowing appetite and some savings from the last 18 months.

($1 = 0.7256 pounds)