UK mortgage approvals drop to lowest in over a year after tax break ends

By David Milliken

LONDON (Reuters) -The number of mortgages approved by British lenders for house purchase fell more than expected in April to their lowest in over a year as the market adjusted to higher purchase taxes.

Earlier government data showed that British house purchases surged in March to take advantage of the final month of an exemption from stamp duty land tax for many buyers, before slumping in April when the tax reverted to its normal rate.

Mortgage approvals - which are typically given at least a month before a purchase completes - fell to 60,463 in April from a downwardly revised 63,603 in March. This was the lowest total since February 2024 and below economists' expectations in a Reuters poll of a smaller fall to 63,000.

Net mortgage lending fell by 759 million pounds ($1.03 billion) in April - the largest monthly drop since January 2024 - after a 12.957 billion pound rise in March.

This weakness may prove temporary. Earlier on Monday, Nationwide Building Society - Britain's second-largest mortgage lender - reported faster than expected house price growth in May and said underlying demand remained strong due to low unemployment and wages outstripping inflation.

However, consultancy Capital Economics said April's drop represented the third consecutive drop in mortgage approvals and the decline might not all be due to buyers bringing forward purchases to beat the tax deadline.

Ruth Gregory, Capital's deputy chief economist, said she saw downside risks to her forecast of 3.5% annual house price growth for the fourth quarter of 2025.

Nationwide's data showed prices up 3.5% in the year to May.

The BoE data also showed unsecured consumer lending rose by a net 1.580 billion pounds - above economists' 1.1 billion pound forecast - and the annual growth rate rose to 6.7% from March's 6.2%, the fastest growth since October 2024.

Capital viewed this as a sign that British domestic consumer demand remained strong despite downbeat headlines in April around U.S. President Donald Trump's tariff plans, while KPMG interpreted it as evidence that households had come under strain from an outsize rise in household bills in April.

($1 = 0.7382 pounds)

(Reporting by David Milliken; editing by Suban Abdulla and Toby Chopra)