Mortgage lending slows in UK property market

LONDON, June 2 (Reuters) – British mortgage lending slowed to a crawl in April, increasing at the slowest pace since 2012 as a new tax on landlords took effect, while mortgage approvals also dropped, official data showed on Wednesday.

Mortgage lending slows in UK property market because only  grew just 281 million pounds in April, a fraction of the 3.8 billion pounds increase forecast from a Reuters poll of economists and down sharply from a 7.411 billion pound rise in March.

This was the slowest rise since August 2012, while approvals for new mortgages in April – a bellwether for future property market activity – also dropped by more than forecast to 66,250, the lowest since May 2015.

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.

Less comprehensive figures from the British Bankers’ Association last week showed the number of mortgages approved by British banks in April fell to its lowest number since March 2015, hit by the new tax.

The Bank of England said last month it expected property market activity to be volatile around the introduction of the new levy, while the Royal Institution of Chartered Surveyors saw a big fall in buyer interest that may presage a longer lull.

The BoE figures also showed lending to consumers lost pace, expanding by 1.287 billion pounds, the weakest monthly change since December 2015 and significantly less than the 1.6 billion pound rise expected by economists.

Britain’s economy slowed in the first three months of 2016 and the BoE expects weaker growth ahead of the June 23 referendum on the country’s European Union membership.

Earlier on Wednesday, figures from mortgage lender Nationwide showed house prices rose 0.2 percent in May from April, a bit slower than a forecast for an increase of 0.3 percent in a Reuters poll.

The increase matched the rise in April and was the joint weakest since November.

Britain’s economic recovery is still heavily reliant on spending by households many of which have been buoyed by strong growth in the value of their homes.