The key chart
(Source: BoE; ECB; CMMP)
Synchronised slowdowns
News that UK house prices fell at their sharpest level since 2012 last month (-1.1% YoY) will come as no surprise to those who follow the messages from the money sector and the previous, “Steady as she slows” posts.
(Source: BoE; CMMP)
The Bank of England’s latest data release (1 March 2023) also showed that net borrowing of mortgage debt by individuals fell to £2.5bn in January 2023 from £3.1bn in December 2022 (see chart above). In both cases, these monthly flows were below the pre-pandemic average of £3.9bn (0.7x and 0.8x respectively).
With net approvals, an indicator of future borrowing, also decreasing to 39,600 in January 2023 from 40,500 in December 2022 (see chart below), it is reasonable to assume that this slowdown will continue.
(Source: BoE; CMMP)
These trends are part of a synchronised slowdown in monthly mortgage flows in both the UK and the euro area (EA). As noted in earlier posts, the slowdown in the EA is even more marked. Monthly mortgage flows fell to €2.8b in January 2023, from €4.6bn in December 2023. In these cases, the monthly flows were only 0.2x and 0.4x the pre-pandemic average flow respectively. More significantly, in Germany and France, the EA’s two largest mortgage markets, there were net repayments in January 2023.
Given that mortgage demand typically displays a coincident relationship with real GDP, the message from the UK and EA money sectors remains one of rising risks to the economic outlook.
The challenging context for central banks remains…
Please note that the summary comments and charts above are abstracts from more detailed analysis that is available separately.