House prices rise but lending slows

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The consumer economy began the new year firing on most of its cylinders, according to figures yesterday showing a rise in house prices, mortgage approvals and optimism.

The price of the average home and the number of mortgage approvals, which point to future price rises, both posted the largest increase for 18 months.

But a cautionary note was struck by a sharp fall in the growth of unsecured lending - credit cards and bank loans - to its lowest level for more than a decade.

Retail sales were weak in January, a separate survey showed although that study did not fit with a welter of upbeat reports from the high street.

Nationwide said the price of the average property rose £1,228, or 1.4 per cent, in January to reach £158,478. It was the strongest rise since June 2004. The annual rate of price growth rose to 4.4 per cent from December's 3 per cent, which Nationwide said confirmed the strengthening trend in place since the autumn.

The Bank of England said high street lenders approved 122,000 mortgages in December, the highest total in 18 months and up from November's 116,000. Analysts said the total was just 10,000 short of the peak for the cycle in December 2003 that presaged a surge in house price inflation over 20 per cent the next year.

Meanwhile, the bellwether consumer confidence survey by GfK showed optimism among households mounted an unexpected recovery in January. Its barometer of consumer sentiment rose six points to minus three, after a minus nine reading in December.

But the CBI retail survey showed a balance of 11 per cent of retailers reported sales were lower in January than a year ago.