Housing market to heat up in autumn
House prices look set for a hot autumn after official figures yesterday showed the number of new mortgage approvals reached a five-month high of 120,000 in June.
Figures from the Bank of England showed that approvals - a precursor to movements in house prices two months down the line - were 3,000 higher than May's figure. However, the amount of money lent, both to buy a house and for day-to-day high street spending, both slowed in June, the Bank said.
Economists said signs of continued strength in the housing market would put the Bank on alert for the need to raise interest rates. But they were split over whether its Monetary Policy Committee would act at its meeting tomorrow and Thursday, which is emerging as its toughest call since August last year.
A raft of figures recently has shown GDP growth above trend, inflation moving significantly above target and a renewed boom on the high street and in the housing market.
"A central banker's job, according to one former Fed chairman, is to remove the punchbowl as the party gets going," Kevin Daly at Goldman Sachs said. "For the UK economy, that time is now."
But others, such as Robert Barrie at Credit Suisse, said speculation of an August rate rise had been fuelled by the fact the Bank has preferred in the past to move rates in the months when it publishes its new forecasts - as it will do next week.
Consumer credit - unsecured loans such as credit card debts - rose by £800m in June, down from £1.3bn in May and just half the average rise of £1.9bn seen in 2004. Credit card borrowing rose by just £43m, its smallest monthly increase since 1994.
Vicky Redwood, the UK economist at Capital Economics, said: "The weakness of credit card borrowing suggests that consumers have not thrown all caution to the wind."
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