Rise in mortgage approvals points to housing recovery

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The Independent Online

Britain's housing market appears set for a revival, analysts said yesterday, as mortgage approvals posted their first annual rise for a year last month.

The UK's major banks approved 69,500 mortgages in August, a rise of 8.5 per cent from a year ago. It was the first year-on-year increase since June 2004, and compared with 65,611 approvals in July. Mortgage approvals - loans agreed but not yet made - are a firm pointer towards house price trends.

The upbeat report from the British Bankers' Association comes a week after the Royal Institution of Chartered Surveyors said prices fell at their slowest pace in 11 months in August.

Meanwhile Linden Homes, a housebuilder, said reservations of new properties were up almost 50 per cent in the first two weeks of September. "We can look forward to the market gathering momentum over the autumn period," Philip Davies, Linden Homes' chief executive, said.

The BBA said the total amount of money lent grew by 1 per cent year on year to £16.8bn, its first annual increase for a year. David Dooks, the BBA's statistics director, said: "Stronger remortgaging activity, representing 36 per cent of all approvals, suggests that borrowers are shopping around for better deals, and gross lending will hold up in the coming months."

Analysts said the BBA number could feed through to and push the Bank of England figures for mortgage approvals above 100,000 for August for the first time since June last year.

But others said it was unclear whether August's upturn - which also showed up in the monthly Halifax prices survey - was a one-off rather than start of a new rise in prices. Howard Archer, a UK economist at Global Insight, said: "Any significant renewed strengthening of house prices seems unlikely for some time to come given still stretched affordability ratios."

The BBA figures also showed consumers paid off credit card debts rather than take on more borrowing, implying that the upturn in housing has not fed through to the high street. "Cards are generally not being used to increase debts," Mr Dooks said. "The overall trend in consumer credit is less than half the level this time last year."

Meanwhile, the number of visitors to Britain's main shopping centres was still below last year's level despite a small weekly rise. Shopper numbers last week were 4.8 per cent lower than the same week in 2004. Town centres recorded a 6.6 per cent fall, according to the retail traffic analysts FootFall. Ian Wilcock, the group director, said: "It has been a gloomy summer for retailers and this slow start to the autumn trading period does not suggest a quick recovery is likely."