Mortgage approvals point to renewed housing strength
Saturday 30 December 2006
The housing market looks set for a robust start to the new year after figures yesterday showed a sharp jump in the number of mortgages approved by the main lending banks last month.
The British Bankers' Association said 77,788 people reserved a loan to buy a home in November, up almost 4 per cent on October and more than 9 per cent ahead of last year.
Mortgage approvals tend to point to the movement in house prices several weeks ahead when the money is used to complete the house purchase.
"The strength of mortgage approvals indicates that August's interest rate rise had little immediate cooling effects on the housing market," said Howard Archer, chief UK economist at Global Insight.
The BBA also revised up its initial estimate of underlying new mortgage lending to £6.7bn from what was already a record high of £6.5bn.
David Dooks, head of statistics at the BBA, said: "The high number of loans approved in November, which is not usually a strong month, suggests that the trend in mortgage lending will continue to be robust over the next few months."
The figures support other data depicting a resilient housing market after two interest rate rises this year and with economists expecting higher borrowing costs next year.
On Thursday, the Nationwide building society house price index showed prices rising at their fastest annual rate in two years.
Separate figures yesterday showed homeowners borrowed more against the value of their homes in the three months to September. Mortgage equity withdrawal rose to £11.8bn in this quarter from a downwardly revised £11bn in the second. This lifted it to 5.4 per cent of post-tax income from 5.1 per cent in the second quarter and a low of 3.1 per cent in early 2005. Nevertheless, it is well below the peaks of around 9 per cent of post-tax income seen in 2003.
The data record the difference between borrowing secured against housing and an estimate of what has been spent to improve the housing stock. The big issue for the Bank of England is whether the money is being used to boost savings, which will have little impact on inflation, or to fund a festive spending spree.
"Few numbers are as misunderstood as these," said Malcolm Barr at JP Morgan. "The extent to which a solid housing market is an effect of forces also supporting spending versus a cause of higher spending remains a big area of debate."
The new year is unlikely to bring any relief for first-time buyers (FTB) struggling to get a foot on the property ladder. The average price paid by an FTB broke through the £150,000 barrier for the first time this year, according to research by Halifax.
The average price increased by 11 per cent in 2006 to £151,565 from £137,122 in 2005. The average house price paid by an FTB has risen by 95 per cent from £77,914 in 2001.
Halifax calculated that a typical FTB was unable to buy an average house in 93 per cent of towns in 2006. The least affordable placewas Gerrards Cross in Buckinghamshire, where the average property price was 16.7 times the average income of an FTB household.
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