Eurozone Inflation and UK Mortgage Approvals: Key Economic Updates
Eurozone Inflation on the Rise:
Inflation in the eurozone increased slightly in May 2024, with consumer prices rising by 2.6% year-over-year, compared to 2.4% in April, driven primarily by higher costs in services and food. Core inflation, which excludes volatile items like food and energy, also saw a rise to 2.9% from 2.7% in April. The European Central Bank (ECB) has kept its main interest rate at 4% since September. Despite the current inflation uptick, policymakers are anticipated to lower interest rates at their upcoming meeting. This would distinguish the ECB as the first major central bank to reduce rates while others, such as the Federal Reserve and Bank of England, have been hiking rates to mitigate inflation pressures.
UK Mortgage Market Movements:
According to the Bank of England, mortgage approvals in the UK dipped slightly in April, with 61,100 approvals compared to 61,300 in March. Despite rising mortgage rates, which edged higher as lenders revised their expectations for rate cuts, there was an increase in net mortgage borrowing for the month to £2.4 billion from £0.5 billion previously. Concurrently, consumer credit borrowing decreased to £0.7 billion in April from £1.4 billion as households curtailed credit card spending. UK savers also deposited a record £11.7 billion into Individual Savings Accounts (ISAs) in April.
UK Housing Market Development:
House prices in the UK saw a modest rebound in May, rising by 0.4% according to Nationwide Building Society, which pushed the annual growth rate to 1.3%. The increased consumer confidence was bolstered by solid wage gains and lower inflation. Experts predict that expected interest rate cuts in the coming months could further stabilize or increase property prices, with the upcoming general election on July 4 considered unlikely to disrupt the housing market significantly.