Mortgage approvals on the increase

The number of mortgage approvals for buying a house has risen to its highest point in nearly two years, official figures showed today, but economists warned this was unlikely to signify a longer term boost.

Loan approvals for house purchase rose to 52,743 in October, reversing a dip in the previous month's figures, which had recorded a fall for the first time in six months.

The last time this figure was so high was in December 2009, when more than 58,000 approvals were made.

But Capital Economics analyst Samuel Tombs said the "reasonable" rise in UK mortgage approvals shown by the Bank of England's latest figures appeared unlikely to mark the beginning of a sustained pick-up.

He said: "The number of mortgage approvals for new house purchase rose from 51,200 in September to 52,700.

"But this just reversed September's drop. Rapid falls in employment and real earnings, as well as deteriorating conditions in wholesale funding markets, suggest that approvals are unlikely to keep rising."

Meanwhile, the amount people borrowed on credit cards rose by £93 million last month, although other loans and advances remained "broadly unchanged", the Bank of England said.

Mr Tombs said the latest figures, released on the same day the Chancellor makes his Autumn statement, perhaps reflected "tighter credit constraints".

He said: "The banking sector therefore looks set to remain a significant constraint on the economic recovery for some time to come."

The Bank's update also showed the number of approvals for remortgaging stood at 34,666, a figure which has remained broadly unchanged since August.

Mortgage and remortgage lending rose by £1.3 billion in October following more modest increases for much of this year.

The last time the increase was as high was in January this year, which recorded a £1.6 billion rise.

Howard Archer, chief European and UK economist at IHS Global Insight, said the overall figures reflected a desire by consumers to keep a tight grip on their finances, amid fears over jobs and the economic outlook.

He warned: "Going forward, there is the danger that increased 'stressed borrowing' will occur with more people having to borrow to help finance their spending as a consequence of the extended squeeze on their purchasing power coming from elevated inflation, low wage growth and tighter fiscal policy. In addition, job losses are rising."

PA