Rise in borrowing signals housing recovery

DIANE COYLE Economics Correspondent

The housing market is finally showing tentative signs of its long-awaited recovery. Mortgage borrowing jumped last month, according to figures from the building societies and high street banks yesterday. Mortgage commitments returned to their highest lev el for nearly 18 months. The mortgage figures, the most cheerful for some time, followed an upbeat survey of estate agents published by the Royal Institute of Chartered Surveyors on Monday. A majority of estate agents said buyers' interest had increased, and more than four-fifth s said house prices had been stable in their area for the past three months. Peter Williams, of the Building Societies' Association, said: "There are signs of confidence returning to the market." He added that further expected cuts in base rates would help the traditional spring recovery. The Chancellor and Governor of the Bank of England are next due to meet on 7 March, when many City analysts expect them to cut the cost of borrowing by another quarter point to 6 per cent. City analysts were yesterday cautiously optimistic about trends in the housing market. Rob Thomas, a housing expert at investment bank UBS, said"these are better figures than we have seen for some months". Ian Shepherdson, of HSBC Midland, was in no doubt that a recovery has begun. "Rising mortgage commitments are the best short-term leading indicator of house prices, so the firming of activity in recent months points clearly to further price increases," h e said. House prices could rise by between 2 per cent and 5 per cent this year, economists predict. The Halifax building society said prices had edged up in each of the past six months, but they still ended 1995 slightly lower than a year earlier. The society's house price figures for February will be released next week. Building societies reported a rise in new loans to pounds 822m in January from pounds 707m the previous month, while the big high street banks separately reported a small increase in their mortgage lending, to pounds 564m from pounds 523m. Even more encouraging was a rise new mortgages approved by building societies - a good indicator of borrowing trends - to pounds 3.2bn, their highest since September 1994. t Mortgage lenders have produced a draft code of conduct. The voluntary code sets out the standards expected of lenders and the complaints procedure for people who feel they have been dealt with unfairly.