Instant View: June mortgage approvals slump in June

LONDON (Reuters) - British mortgage approvals and lending slumped in June, echoing broader economic weakness that month due to extra public holidays and very wet weather, Bank of England data showed on Monday.

ANALYSTS' VIEWS

ROSS WALKER, RBS:

"You see the broad money supply figures slowing, though it's a pretty erratic series, but it is now 3 percent annualised growth and it needs to be, over the medium term, probably more like 5 or 6 percent. It's probably running at about half the level that would over time be consistent with hitting the inflation target.

"The other thing that stood out was the net selling of gilts by non-residents, which you get in the detail of M4 numbers. We had the biggest net selling of gilts since April 2009 in June. We have had five months now of successive months of net selling. It might just be that overseas accounts are beginning to question the attractiveness of gilts at these levels."

TOM VOSA, NATIONAL AUSTRALIA BANK:

"June was a fairly wet month, so we had been looking for mortgage approvals to come in at around 45,000, principally on the basis that we didn't think many transactions would be taking place. But the softness that we've been seeing in lending data looks to be consistent with the idea that the tightening that we've seen, particularly on interest-only mortgages, has meant that homeowners are finding it increasingly difficult to get a mortgage. And it's consistent with the Hometrack data, which would now begin to show a cooling market in London and the south-east.

"Overall, we're still seeing a fall in net lending -- the banking system is still reducing credit. Really it shows you why the MPC decided to introduce the Funding for Lending scheme which starts in August. Until we get the credit channel freed up and growing, it's difficult to believe that we can get GDP growth of more than 1 percent.

"On Thursday, the MPC will only have had about two days of the Funding for Lending scheme and I think they will wait to see how that goes. We still think they'll cut rates in the second half of the year."

SAMUEL TOMBS, CAPITAL ECONOMICS:

"June's money and lending figures suggest that the financial sector is acting as an increasing drag on the economic recovery... The low level of consumer confidence and recent tightening of credit conditions suggest that approvals are likely to remain depressed in the second half of this year.

"Given our view that the euro zone crisis is likely to intensify, thereby weakening UK banks, we continue to expect weak money and credit growth to undermine the pace of the economic recovery for some time to come."

VICTORIA CLARKE, INVESTEC:

"This is a sharp drop in activity levels. The figures seem to have been hampered by weather and the Jubilee, which the Bank said they haven't adjusted for, but even so the readings are pretty gloomy and fit with the broader run of weak economic data and subdued data from the housing markets. We're back to pre-crisis levels. They're indicative really of households still being nervous, and credit lines still being tight. Any kind of recovery is still being put off.

"This data is for June, so it's not going to change this Thursday's policy decision. The Bank are aware of this weakness, but they are sitting back and appraising their efforts in terms of quantitative easing and the Funding for Lending scheme. They really are in wait-and-see mode now."

ADAM CHESTER, LLOYDS:

"The figures are clearly a bit weaker than expected. Mortgage approvals have been somewhat massaged by the weaker BBA numbers that we had. Nevertheless the money supply figures show monetary conditions continue to remain very challenging.

"Clearly these numbers won't yet have been impacted by the quantitative easing decision in July but I think it underscores the case for the Bank to continue to inject liquidity into the system. We expect the policy to remain unchanged this week."

KEY POINTS

Lowest number of mortgage approvals since Dec 2010

Lowest total net lending since July 2010 at 280 million pounds

Biggest net fall in mortgage lending secured on dwellings since December 2010 at -355 million pounds

Sharpest annual fall in M4 money supply since monthly records began in 1983

(Reporting by Sophie Kirby, Venetia Rainey, Tim Castle and Olesya Dmitracova)

Source: http://news.yahoo.com/june-mortgage-approvals-slump-june-085311549--business.html

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