Remortgaging level at 19-month high

The number of people remortgaging rose to a 19-month high during February as homeowners braced themselves for interest rate rises, figures showed today.

A total of 27,144 people switching to a new deal had their loan approved during the month, the highest level since July 2009, according to the British Bankers' Association.

The group said homeowners appeared to be keen to take advantage of the competitive deals that were currently available, after recent high inflation figures have stoked expectations that the Bank of England may raise interest rates sooner than previously thought.

But activity in the housing market remained subdued, with just 29,923 mortgages approved for house purchase, slightly ahead of January's figure, but 11% down on the same month of 2010.

It was also significantly below the level of 70,000 to 80,000 approvals a month that are thought to be consistent with a stable housing market.

Mortgage advances totalled £7.9 billion during February, the lowest figure since November last year, while net lending, which strips out redemptions and repayments, was also below the recent six-month average at £1.3 billion.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "The BBA data point to housing market activity still stuck in the doldrums, which seems highly likely to maintain downward pressure on prices in the near term at least.

"Despite the modest pick-up in mortgage approvals reported by the BBA in February, the housing market clearly is still very weak, which does not bode well for house prices."

Unsecured borrowing remained subdued during February, with consumers collectively repaying £40 million more than they took on in new debt.

Within the total, outstanding credit card debt rose by £160 million, due to interest and charges, as repayments continued to outstrip new spending.

Borrowing through loans and overdrafts contracted by £200 million, the 19th consecutive month during which the level of outstanding debt has fallen.

But there was a drop in the amount people saved, with new deposits totalling £753 million - around half the £1.45 billion that was saved in January, although savings levels are now 4.2% higher than they were a year ago.

BBA statistics director David Dooks said: "Household demand for unsecured credit is weak, as people continue to cut back on borrowing and build up deposits."

Paul Diggle, property economist at Capital Economics, said: "After falling fairly steadily through 2010, the latest rise suggests that mortgage approvals for house purchase may be finding a floor.

"But the bigger picture is that, with approvals for house purchase extremely subdued, the mortgage market remains a drag on house prices."