The key chart
The key message
November 2022 monthly mortgage flows point to a synchronised slowdown in mortgage demand in the UK and EA, but with a sharper rate of decline in the EA (driven by German and French dynamics). Mortgage demand typically displays a co-incident relationship with GDP growth. In this context, turning points are more significant than the rate of change. The key message here relates more to a synchronised slowdown in economic activity in both regions, therefore, rather than “point-scoring” between them!
Synchronised slowdowns?
(Source: BoE; CMMP)
Monthly UK mortgage flows rose to £4.4bn in November 2022, up from £3.6bn in October 2022. While this is well below the recent peak flow of £17bn in June 2021, it is above the pre-pandemic average flow of £3.9bn.
According to the latest, Bank of England data release (4 January 2022), approvals for house purchase, an indicator of future borrowing, decreased from 57,900 in October 2022 to 46,100 in November 2022, the lowest level since June 2020. It is reasonable, therefore, to expect lower UK flows in coming months.
Mortgage flows are slowing at a faster rate in the EA than in the UK. The 3m MVA of monthly mortgage flows in the EA has fallen from 2.1x pre-pandemic flows in July 2022 to 0.9x pre-pandemic flows in November 2022 (see key chart above). In contrast, UK monthly flows remain above pre-pandemic levels on a monthly basis (1.1x) and a smoothed basis (1.2x).
Mortgage demand typically displays a co-incident relationship with GDP growth. In this context, turning points are more significant than the rate of change. So, as above, the key message here relates more to a synchronised slowdown in economic activity in both regions rather than “point-scoring” between them!
Please note that the summary comments above are abstracts from more detailed analysis that is available separately.