UK lenders report surprise rise in mortgages in May, consumer lending cools

UK lenders report surprise rise in mortgages in May, consumer lending cools

LONDON (Reuters) -The number of mortgages approved by British lenders for house purchases unexpectedly jumped in May, according to Bank of England data that suggested the housing market recovered quickly from the end of a tax break for homebuyers in April.

Mortgage approvals rose to 63,032 in May from 60,656 the month before, and confounding the median forecast in a Reuters poll of economists for a fall to 59,750.

"The gradual easing of interest rates could be helping to boost confidence and demand amongst mortgage borrowers," Karim Haji, global and UK head of financial services at accountants KPMG, said.

Britain's housing market slowed in April after the expiry of a tax incentive for some homebuyers.

The BoE's data published on Monday showed approvals for people looking to re-mortgage rose by the most in May since February 2024 in May.

Net mortgage lending - which reflects completed house purchases - rose by a net 2.054 billion pounds compared with a fall of almost 800 million pounds in April.

The BoE data showed unsecured consumer borrowing rose by slightly less than expected, potentially signalling a recovery in spending power.

In cash terms, consumer credit increased by a net 0.86 billion pounds ($1.18 billion) in May from 1.94 billion pounds in April - below the Reuters poll consensus for a 1.05 billion-pound rise.

"The cost of living remains high, but a drop in consumer borrowing in May signals that rising incomes are starting to feed through to the cost of day-to-day expenses," Haji added.

The BoE held interest rates at 4.25% earlier this month, and investors are betting that the central bank will reduce borrowing costs in two further quarter-point moves to 3.75% by the end of the year.

($1 = 0.7302 pounds)

(Reporting by Suban AbdullaEditing by William Schomberg)