UK Mortgage Approvals Slump

Arthi Gupta
23 Sep, 2010
New York City

The UK indexes fell after mortgage approvals declined and auto production increased in August. The Bank of England Chief Economist Spencer Dale urged for reduction in monetary stimulus. Second GDP of Ireland contracted and current account deficit narrowed.

[R]4:15 PM London – The UK indexes fell after mortgage approvals declined and auto production increased in August. The Bank of England Chief Economist Spencer Dale urged for reduction in monetary stimulus. Second GDP of Ireland contracted and current account deficit narrowed.[/R]

In London trading, FTSE 100 Index fell 26.71 or 0.48% to 5,525.20 and the pound edged higher to close at $1.5681.

The Bank of England Chief Economist Spencer Dale said at an event in Cardiff that with monetary policy extraordinarily loose, the natural thing to do during a recovery would be reduce the degree of monetary stimulus.

He further said with inflation forecast to remain above target until the end of next year, there was a very real risk of the central bank losing its credibility. ""We lose our credibility at our peril - once the genie of inflation credibility escapes it is costly to put back - monetary policy would need to tighten, possibly aggressively so,"" he said.

Mortgage lending by British banks continued to slow in August with the number of loans approved by main banks falling to a 16-month low.

The number of mortgages approved for home purchase in the UK declined to under 31,800 in August from over 34,200 in July, the British Bankers'' Association said, the lowest level since April 2009.

In value terms, mortgage approvals fell to £4.7 billion in August from £5 billion in July.

Data showed that the number of re-mortgaging approvals rose to around 23,900 from 23,000, and equity withdrawal and other purposes fell to 18,300 from 18,550.

Car production in the UK increased 37.3% on an annual basis to 77,882 units in August, according to a report released by the Society of Motor Manufacturers and Traders today.

The commercial vehicles production rose 22.1% on an annual basis to 5,885 units in August, while total engine production advanced 15.4% and total vehicles production soared 36.1% to 83,767 units.

Ireland''s current account deficit narrowed to €1.14 billion in the second quarter from €1.6 billion in the first quarter, the Central Statistics Office said today.

Net income outflows dropped to €7.98 billion from €8.2 billion due to a reduction in net portfolio investment income. Capital account balance showed a deficit of €28 million compared to a surplus of €17 million.

Ireland''s economy contracted in the second quarter from the previous three months period, a preliminary estimate by the Central Statistics Office showed today.

The seasonally adjusted gross domestic product fell 1.2% on a sequential basis in the second quarter, compared to a 2.2% rise in the previous quarter.

Exports increased 3.3% sequentially in the second quarter, compared to an 8.6% rise in the previous quarter. Similarly, imports grew 5.6% in the second quarter, after a 4.3% rise in the first quarter.

On an annual basis, the Irish GDP dropped 1.8% in the second quarter, following a 0.9% fall in the first quarter. The annual GDP has been declining since the first quarter of 2008.

Gainers & Losers

AEC Education plc slumped 7.2% to 18.09 pence after the education services provider reported first-half revenue surged 169% to £8.64 million from £3.21 million in the year-earlier period. Profit in the period plunged 91% to £0.31 million from £0.36 million.

Mitchells & Butlers plc rose 1.80% to 300 pence after the pub restaurants operator said like-for-like sales for the nine weeks ended September 18 increased 3.6% on strong food sales growth.

MJ Gleeson Group plc slumped 4.05% to 106.50 pence after the home builder stated fiscal 2010 revenue grew 8% to £46.53 million from £43.03 million a year ago. Pre-tax profit for the year was £447,000 compared to a loss of £50.69 million last year.

Scisys Plc declined 2.52% to 47.52 after the supplier of IT services and systems reported first-half revenues rose 3% to £20.9 million from £20.3 million last year. Profit in the period surged to to £0.53 million or 1.8 pence compared with profit of £ 0.013 million or 0.04 pence per share last fiscal.

Westminster Group plc surged 4.76% to 22.00 pence after the company that specializes in fire, safety, security and defense reported first-half revenues dipped 0.8% to £2.35 million, compared to £2.37 million in the prior-year period. Loss before tax widened 111% to £1.42 million, from £672 thousand in the prior-year period.