Home loan approvals hit fresh high

Mortgage approvals hit their highest level in two-and-a-half years in September, in another sign this summer's surprise interest rate rise has done little to cool the housing market. It paves the way for an increase next week.

The Bank of England said yesterday that approvals for home loans stood at 126,000 last month, up from 120,000 in August and the highest since February 2004.

Analysts said the figures suggested house price growth would remain buoyant in the coming months and sealed the case for a rise in borrowing costs to 5.0 per cent when the Bank holds its monthly policy meeting next week.

Expectations of more rate rises in the new year are also growing, given the Monetary Policy Committee's concerns that inflation remains above the 2 per cent target and could feed demands for higher wages.

Yesterday's data came as property consultant Hometrack said house prices rose at their fastest annual rate in two years in October, while surveys from the mortgage lenders Nationwide and Halifax put house price growth at 8 per cent last month. That is nowhere near the double-digit rates of growth at the height of the housing boom two years ago, but analysts said it might start ringing policymakers' alarm bells.

The BoE figures showed mortgage lending was also robust, rising by £8.298 bn last month - only slightly less than expected and more than the £8.763bn increase in August.

Nick Verdi, an economist at Barclays Capital, said: "This all suggests that the housing data could take a more prominent role in future Monetary Policy Committee meetings than they have done in recent months."

The Bank data also showed net consumer credit rose by £924m, much more than forecasts of an £800m gain. Within that, credit card borrowing jumped by £365m, reversing a decline of £283m in August - which was the biggest fall since records began.

Also, M4 money supply growth was confirmed at an annual rate of 14.5 per cent - its fastest rate since September 1990. That is likely to worry policymakers, who have flagged up the data as harbinger of building inflationary pressures.