UK mortgage approvals and consumer credit rise in February

Mortgage approvals in the United Kingdom rose to their highest level in three months this February, as consumer credit growth hit a near two-year peak. Data from the Bank of England indicates that 62,584 new mortgages were approved for house purchases, up from 60,246 in January and exceeding the 61,250 forecast by economists. This surge in activity occurred just before the market began to account for the potential economic consequences of the conflict in Iran.

The value of mortgage lending, which typically follows approval trends, increased by £4.840 billion ($6.41 billion) in net terms, the largest rise since September. Consumer borrowing also showed significant strength, with net credit increasing by £1.935 billion in February. This pushed the annual growth rate for consumer credit to 8.5%, the fastest pace recorded since March 2024. Meanwhile, the M4 money supply grew by 3.9% annually, up from 3.6% in the previous month.

Market experts suggest that while the February figures were strong, the outlook is now clouded by rising borrowing costs. Paul Dales, chief UK economist at Capital Economics, noted that the money supply growth remained relatively subdued prior to the recent geopolitical escalation.

This still represented a relatively subdued growth rate ahead of the outbreak of the Iran war, suggesting the burst of inflation triggered by higher energy prices is more likely to be short-lived than long-lasting.

According to Dales, the increase in two-year fixed mortgage rates—which rose to 4.8% from 4.0% following the start of the conflict—is likely to dampen house price growth. Capital Economics now expects annual house price increases to fall below their previous forecast of 3.5%.