(Bloomberg) -- U.K. mortgage approvals rose for a second month in July after Chancellor of the Exchequer Rishi Sunak announced a tax holiday to kickstart the coronavirus-battered housing market.
Lenders signed 66,281 home-loan agreements, more than forecast and up from 39,902 in June, the Bank of England said Tuesday. Demand for unsecured credit was also stronger than expected.
July saw a stampede to snap up homes after the threshold for paying stamp duty, a home-buying tax, was temporarily raised as part of a package of measures to support jobs and the economy. The initiative, which runs until March 31, saves someone purchasing a property up to 15,000 pounds ($20,000) and around nine in 10 buyers are forecast to pay no tax at all.
The move built on a revival following the reopening of the English housing market on May 13, with Wales, Scotland and Northern Ireland following suit in June.
But many estate agents doubt that the improvement can be sustained, with the economy recovering from a record recession and fears mounting that the withdrawal of government support programs could trigger a wave of mass unemployment.
Consumers borrowed an extra 1.2 billion pounds of unsecured credit in July, ending four straight months of repayments – the longest stretch since the aftermath of the financial crisis. The increase coincided with a continued pickup in retail sales, suggesting some of the spending was financed with debt.
Household deposits rose 7 billion pounds, taking the taking the total amassed since the lockdown began in late March to over 61 billion pounds.
The increase was nonetheless significantly smaller than in recent months, reflecting increased opportunities to spend as the economy reopens. The question is whether consumers feel confident enough to maintain their spending, which powers the British economy.
Companies repaid 3 billion pounds of bank loans on balance, with continued borrowing by smaller and medium-sized businesses more than offset by repayments by large firms.
©2020 Bloomberg L.P.
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