Mortgage lending bounced back during January as the property market recovered some of the ground it lost due to the severe winter weather in December, figures showed today.
Net lending, which strips out redemptions and repayments, rose to £1.8 billion, its highest level for a year, and a significant turnaround from the previous month, when it had contracted by £268 million, according to the Bank of England.
There was also a 7% rise in the number of mortgages approved for house purchase, with these increasing to 45,723.
But despite bouncing back from December's 21-month low, the number of loans in the pipeline for people buying a new home were still lower than they had been in November.
They also remained well down on the 70,000 to 80,000 approvals a month which economists consider to be consistent with a stable housing market, and are less than half the levels of more than 100,000 a month seen during the credit boom.
The figures came as Nationwide said the housing market was continuing to "tread water" after property prices edged ahead by 0.3% in February.
The increase, which was only the second gain recorded since May last year, left the average home costing £161,183.
But the group saw little reason to be optimistic, saying it expected the housing market to be "sluggish" during 2011.
Annual house price inflation remained in negative territory, with prices 0.1% lower than in February last year, although this was a slight improvement on the fall of 1.4% seen in the year to the end of January.
Demand for property has been hit by uncertainty over the future direction of both the housing market and the wider economy, keeping many potential buyers on the sidelines, while those who do want to go ahead with a purchase are continuing to struggle to raise the mortgage finance they need.
Robert Gardner, Nationwide's chief economist, said: "Given that the (economic) recovery hit a soft patch at the turn of the year and looks set to remain sluggish in the year ahead, the property market is likely to follow suit, with relatively low transaction levels and prices moving sideways or modestly lower through 2011."
Ed Stansfield, chief property economist at Capital Economics, said: "This morning's data paints a picture of a housing market that is struggling for direction.
"But while the pace of any further falls is hard to judge, with mortgage demand so low, February's modest rise in the Nationwide house price index is unlikely to be a signal that recent falls in house prices have run their course."
The Bank of England figures also showed that consumers repaid £333 million more than they borrowed through credit cards, overdrafts and loans during January. The figure was the biggest net repayment of unsecured debt since October 2009.
Within the total, credit card debt increased by £75 million, double the £38 million increase recorded in December.
But the rise was more than offset by a £407 million contraction in borrowing through loans and overdrafts.Reuse content