New mortgages highest since 1994 as credit fuels high street

Just how good do we really feel?
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It may not feel like the "feel-good factor" yet, but economists, housing analysts and retailers queued up yesterday to tell us that rising spending means that though still not in a state of ecstatic happiness, we are no longer feeling as grumpy as last year.

Mortgage-lending figures from the Building Societies Association showed that new lending commitments rose to 53,000 in July, the highest total since March 1994. Lending totalledpounds 1.2bn, 7 per cent more than in the same period last year.

The BSA added that mortgages were being repaid more quickly, mainly because someborrowers had not changed their standing orders when interest rates fell.

Ron Armstrong, the BSA's deputy director general, said: "Other housing market indicators look promising. Transactions have been increasing since April and house prices have also been rising, encouraging more sellers on to the market."

Further evidence of an increase came from the Credit Card Research Group, which said that plastic-card spending in July was, at pounds 6.9bn, some 16 per cent up on the same period last year. The use of cards in the High Street was up 19 per cent. Elizabeth Phillips, director of the group, said, however, that part of the increase came from the growing popularity of cards compared to money: "Consumers are realising that they can use their debit cards in a wider variety of stores than only supermarkets and petrol stations."

John Lewis said sales at its 23 stores were 7.5 per cent up in the past six months compared to the same period last year.

Ruth Parkhouse, assistant director at the British Retail Consortium, the retail trade body, said: "Sales have increased by about 3 per cent We have seen increases in almost every single retail area.

"This seems to be because customers' confidence is returning. The areas where sales are returning include things like carpets and furnishings, china and glassware, obviously related to the return of confidence in the housing market.

"Generally, you have to say that if someone is prepared to spend a couple of thousands of pounds on new furniture they must be reasonably satisfied that they are not going to lose their jobs."

Jonathan Loynes, UK economist at HSBC Greenwell, added: "It is down to a combination of factors, including mortgage interest rates down to their lowest level for more than 30 years, falling unemployment, down from 2.9 million to 2.1 million in the past four years and the anticipated windfall from building society flotations.

"Probably the most important thing is the state of the housing market which has risen more than 5 per cent in the past 12 months. Negative equity is gradually becoming a thing of the past for many people."

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