Budget 2017

Mortgage approvals in Britain fell to a three-month low in February, while consumer credit slowed despite a surge in credit card borrowing, data released on Friday (24 March) showed.

According to the British Bankers' Association (BBA), banks approved 42,613 mortgages for house purchase last month, down from 44,142 in January, and a 4.6% year-on-year drop.

"Elevated approval volumes for house purchases and re-mortgaging experienced during the winter months fell back in February, to average levels seen throughout most of last year," said Eric Leenders, the BBA's managing director for retail banking.

Meanwhile, the pace at which consumers borrowed also slowed down, declining from 6.7% to 6.6% and falling further behind October's 10-year high of 7.2%. The slowdown came despite an increase in net credit card lending, which climbed to an 11-month high of £301m ($376m).

The total amount borrowed by businesses fell by £1.6bn in February, compared with a £3.4bn increase in the previous month.

"Businesses continue to exercise a cautious approach to borrowing, using cash reserves and alternative lending sources to finance their operations," Leenders said.

While Britain's economy grew strongly last year, economists expect consumers to rein in spending amid mounting inflation and sluggish wage growth.

Inflation rose 2.3% year-on-year last month, up from the 1.8% reading recorded in January and higher than the 2.1% figure analysts forecast, meaning the increase was the fastest on record since September 2013.

Meanwhile, data released last week showed basic salaries grew 2.2% in the three months to January, down from a 2.6% gain in the previous month and falling short of forecast for a 2.4% reading.

"Inflation is now higher than the growth in average earnings, meaning real pay is officially shrinking," said Ben Brettell, senior economist at Hargreaves Lansdown.

"The interplay between these two numbers will be closely watched over the coming months. The UK economy relies heavily on consumer spending and a squeeze on household budgets would not be good news."