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UK mortgage approvals fall ahead of new tax, but lending surges

Suzanne Plunkett | Bloomberg | Getty Images

British mortgage approvals fell for the first time in six months in March shortly before a new tax took effect, but consumers borrowed at the fastest rate in over a decade, Bank of England data showed.

Mortgage approvals for house purchases numbered 71,357 in March, down from 73,195 in February. Analysts in a Reuters poll had forecast 74,500 mortgage approvals were made in March.

British finance minister George Osborne announced in November that he would add a surcharge on the purchase of buy-to-let properties and second homes from April 1, in a move aimed to boost home ownership by first-time buyers.

The news spurred an increase in buying of such properties in recent months before March's slowdown as the deadline approached.

Net mortgage lending, which lags approvals, rose by 7.435 billion pounds last month, the biggest increase since October 2007, before the global financial crisis hit and above all forecasts in the Reuters poll.

Figures released earlier this week by the British Bankers' Association, which are less comprehensive than those of the BoE, also showed a fall in mortgage approvals in March accompanied by a rise in mortgage lending as previously approved deals were carried out.

The BoE said consumer credit grew by 1.883 billion pounds last month, the strongest increase since March 2005 and a long way above the median forecast for an increase of 1.3 billion pounds in the Reuters poll of economists.

The rise was not a one-off: in the first quarter as a whole, consumer credit rose by an annualised 11.6 percent, the strongest increase since the first three months of 2015.

The BoE has said it is not worried about the rise of borrowing in the economy as a whole although it has highlighted some areas of consumer lending, such as car loans, for closer monitoring.

The BoE also said purchases of British government bonds by foreign investors touched their highest level in four months at 7.811 billion pounds in March, more than reversing net sales of 3.029 billion pounds in February.