UK mortgage approvals reached the lowest level since the middle of 2020 as rising interest rates acted as a drag on housing demand. Mortgages approved for house purchases decreased more-than-expected to 46,100 from 57,900 in October, the Bank of England reported Wednesday. This was the lowest level since June 2020, when approvals totaled 40,500. The expected level was 55,000.

The 'effective' interest rate, that is the actual interest rate paid on newly drawn mortgages rose 26 basis points to 3.35 percent in November.

The real impact of the surge in mortgage rates following the "mini" budget announcement on September 23 was realized in November as mortgage approvals collapsed, Andrew Wishart, an economist at Capital Economics, said.

A further fall in mortgage rates together with significant correction in house prices will be necessary before mortgage lending and activity can recover, the economist noted.

In November, consumers borrowed an additional GBP 1.5 billion in consumer credit, which was above the GBP 0.7 billion borrowed in October. Credit was much bigger than economists' forecast of GBP 0.9 billion.

Additional consumer credit borrowing in November was split between GBP 1.2 billion on credit cards and GBP 0.3 billion through other forms of consumer credit. The year-on-year growth for consumer credit was little changed at 7.0 percent in November.

Data showed that UK businesses borrowed GBP 1.9 billion of bank and building society loans in November, in contrast to GBP 7.8 billion of net repayments in October.

Within this, large businesses borrowed GBP 2.2 billion in November, while small and medium sized firms repaid GBP 0.2 billion.

Further, M4 money supply growth eased to 2.5 percent from 4.8 percent in October. On a monthly basis, M4 declined 1.6 percent.

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