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Mortgage approvals surpass Bank forecasts

The Bank of England (BoE) has announced that 114,000 mortgages were approved in May – well above its expectation of a total of 105,000 for the month.It is the first time mortgage approvals have increased since January.Mortgage lending increased by £8.7 billion, the lowest rate of increase since February 2006. Together these indicators provide important information about the housing market as well as information that could affect interest rate decisions made by the monetary policy committee.Mortgage approvals indicate the total value of loans agreed on but not yet made, while mortgage lending indicates the amount of loans made by domestic financial institutions to consumers.The BoE is expected to raise interest rates in its next meeting in order to address concerns about the global oil price crossing $70. An increase in interest rates will discourage borrowing due to the relatively higher costs borne by consumers.In other information released by the bank, net consumer spending increased by £0.8 billion in May representing a faster rate of increase than in April. Net credit card lending fell by £0.2 billion in May in contrast with the £0.1 billion increase in lending in April.

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