The number of mortgages approved for house purchase rose to an eight-month high during March as activity in the property market showed signs of picking up, figures revealed today.
A total of 31,660 loans were approved for people buying a new home, 5% more than during the previous month and the highest level since July last year, according to the British Bankers' Association.
The data backs up anecdotal evidence from estate agents that potential buyers are beginning to return to the market ahead of the traditional spring bounce.
But despite the improvement, the figure is still down on the 35,124 mortgages for house purchase that were in the pipeline in March last year, while it is significantly below the 70,000 to 80,000 approvals a month that are considered to be consistent with a stable housing market.
Mortgage advances continued to be subdued in March, with total lending of £7.75 billion, below both February's figure and the recent six-month average of £7.9 billion.
Net lending, which strips out redemptions and repayments, also dropped to a three-month low of £846 billion, well down on March 2010's figure of £2.62 billion.
The BBA attributed some of the weakness to the fact that households remained focused on paying down debt, leading to people overpaying their mortgages.
The number of loans approved for remortgaging was slightly down on the six-month average at 24,764, but remained up on the levels seen during the first half of last year, as talk of future interest rate rises caused homeowners to review their mortgages.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "Despite the modest pick up in mortgage approvals reported by the BBA in March, housing market activity is still weak and far from supportive to house prices.
"Mortgage approvals were still down 9.9% year-on-year in March and were still essentially only just above half the average monthly level of 57,824 seen since 1997.
"This is consistent with our view that house prices are likely to trend down gradually further over the coming months."
Unsecured borrowing remained negative in March, as consumers repaid £38 million more on credit cards, loans and overdrafts than they took on in new debt.
Within the total, credit card debt rose by £149 million in the month, as a result of interest and charges, with repayments continuing to outstrip new spending.
Borrowing through loans and overdrafts contracted for the 20th consecutive month, with people repaying £187 million more than was advanced in new debt.
Savings levels bounced back in March, with consumers increasing the amount they have deposited by £2.38 billion, more than double February's £746 million rise.
Ed Stansfield, chief property economist at Capital Economics, said: "The mortgage market remained in the doldrums in March.
"Approvals for house purchase data suggest that buyers remained largely inactive in the face of the growing squeeze on household incomes, fragile consumer confidence and recent speculation about the prospect of higher interest rates."Reuse content