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UK Mortgage Approvals in May at 24 month high

The latest figures from the British Banking Association show that mortgage approvals reached a 24 month high in May. In the run up to the General Election April, the risk of an unknown coalition and a mansion tax slowed housing demand. Post-election, with a Conservative majority and interest rates still at 0.50%, buyers are back in force. May mortgage approvals edged up to 42,530 from 42,020 in April, the highest outturn since March 2014.

The latest data supports the view of a reacceleration of the housing market, which some fear could be the catalyst for future economic troubles. House price appreciation pushes first-time buyers further away from their aspiration of ownership, and with less disposable income if they eventually buy a home. The appreciation of housing stock is a benefit to the older generations who have seen their wealth in bricks and mortar grow at an unfathomable rate.

The main concern is the disparity between wage growth and house prices which seems to be accelerating. Without substantial increases in supply and better infrastructure, cities such as London are approaching crisis point. This poses a risk to lending sector, and future economic growth as the general public will have less disposable income as a larger proportion of wages is necessary to cover rent or mortgage repayments.

GBPUSD: 1.5754

EURGBP: 0.7099

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