While the UK economy remains on track for its worst year since 1931, some tentative signs emerged yesterday of eventual recovery. Fresh mortgage approvals – in effect first-time buyers – rose by 19 per cent between January and last month, according to data from the Bank of England, leaving them at their highest level since May last year.
However, that is still 70,000 to 80,000 off the usual monthly flow before the credit crunch, and 44.4 per cent below approvals at this time last year.
Economists say that approvals will need to rise by much more to push prices higher, and retain a generally gloomy outlook. Seema Shah, property economist at Capital Economics cautioned: "The depressing economic outlook provides little encouragement for the housing market's prospects. The rising tide of job losses and slowing pay growth will limit the increase in mortgage demand, and do nothing to make lenders less cautious about advancing new loans. The upshot is that house prices still have much further to fall."
However, those in the real estate world chose to make the most of the news. Simon Rubinsohn, the Royal Institution of Chartered Surveyors chief economist, said: "Further evidence that the pick-up in buyer interest in the housing market is feeding through into actual activity is evident in the latest mortgage approvals data from the Bank of England.
"Even so, accessibility to the market still remains a problem, with many first-time buyers struggling to find the necessary deposit to compensate for the much reduced loan-to-value ratios now being offered by lenders. The fact that transactions have bounced off the bottom hasn't reduced the need for the Government to take further steps to enhance the flow of mortgage finance."
Nicholas Leeming, director of propertyfinder.com added: "The prospect of higher transaction activity is not only good for the spring home-moving season, it's crucial for the economy too. House prices may yet drift lower, but buyers can take advantage now. A typical buyer offered 9 per cent below the asking price in March, saving them around £15,000 on already lower asking prices."
The Bank of England's figures also revealed that government attempts to make the banks lend to companies are perhaps beginning to work. The money supply (M4) figures suggest that lending to non-financial corporations rose by £6.5bn – an increase of 2.8 per cent on the month, though still a little down on the previous year.
There was a net repayment of £245m in consumer credit in February, indicating that consumers are becoming wary of debt and keen to pay off credit-card bills. Last week, government figures showed a large increase in household savings. Even so, the latest evidence on consumer sentiment suggests that shoppers are becoming a little less fearful.
The GfK NOP Barometer of Consumer Confidence showed its best reading in nine months in February.
Rachael Joy of GfK NOP said: "Confidence still remains historically very low, but suggests that lower interest rates and a better picture for household bills are restoring some confidence. Certainly, consumers are feeling better about the likely performance of the economy over the next 12 months."Reuse content