Fresh evidence that Britain's battered housing market is finally on the road to recovery came yesterday with Bank of England figures that showed mortgage approvals for house purchases in June reached 47,584, the highest number since April 2008 and the fifth monthly improvement in a row.
But mortgage lending was a lot lower than expected at £343m – economists had predicted £600m – and total consumer lending was its weakest since the Bank first recorded it in April 1993.
The figures will be followed today by a report from the National Housing and Planning Advice Unit (NHPAU) that says the Government will need to raise its estimates for the number of houses needed by 5 per cent while affordability and under-supply of housing remain huge problems despite the recession.
Building has all but ground to a halt during the downturn but the mortgage figures are the latest in a steady drip feed of data suggesting that the housing crash could have passed its worst.
While the June figure is a sharp improvement on the previous month's 44,169, it also still remains very low by historic standards being only roughly half the long-term average.
According to the Council of Mortgage lenders, there were still 36 per cent fewer house purchase approvals in the first half of 2009 than during the same period of 2008. However, CML economist Paul Samter said there is enough evidence now to suggest a sustained improvement but any recovery is likely to be painfully slow. He said: "Activity is certainly more positive than at the start of the year. This is consistent with the improvement in housing market sentiment, but the outlook is still sluggish, as capacity constraints on the lending industry and continuing deterioration in the labour market will act as a brake on the pick up.
"Overall, these numbers are consistent with our outlook for a gradual improvement from historic lows following the financial system turmoil last year, but for any recovery to be slow and drawn out."
Philip Shaw, economist at Investec, said he was "moderately encouraged" by the Bank's figures: "This is consistent with a steady climb from November's lows of 27k, but is still roughly only half the long-term average. Net mortgage lending inched up again by £0.3bn and consumer credit by an even more sluggish £0.1bn."
But Mr Shaw said there was scope from the Bank's figures on monetary supply to believe that its quantitative easing programme – colloquially, printing money – might be having a positive effect on the economy: "Overall the financial flow numbers are moderately encouraging for economic prospects."
Building Societies also said they saw signs that the market is picking up. Brian Morris, the Head of Savings Policy at the BSA, said:"Gross mortgage lending by building societies was just under £2bn in June 2009, the highest level seen this year, and up 30 per cent on May."
Lending remains at historically low levels, and is 40 per cent lower than in June 2008, but Mr Morris said mortgage approvals showed signs of stabilising as they reached a year high of £1.8bn. The UK data follows on on from figures from the US, where figures have suggested improvement in the housing market there.
The two markets are starkly different though – the US suffers from an oversupply of housing by contrast to the under supply highlighted by the NHPAU. However they are both still highly important in economic terms.
Eight cities, including Chicago, Cleveland, Denver and San Francisco, showed price increases in May, up from four in April and one in March. New York was flat. Optimists have expressed hopes that the worst may be over.