Mortgage approvals rise for third month

By Nicky Burridge,Press Association
Sunday 23 October 2011 07:38

Mortgage approvals for people buying a home rose for the third consecutive month during April in a further sign that the housing market is stabilising, figures showed today.

A total of 43,201 loans were approved for house purchase during the month, the highest level since April last year, according to the Bank of England.

There was also a slight pick up in net lending, which strips out redemptions and repayments, following a steep fall in March.

New mortgage lending increased by £973 million during the month, up from £640 million in March, but still below the recent six- month average of £1.1 billion.

But total mortgage advances slipped to just £10.89 billion, their lowest level since December 2000, reflecting ongoing weak remortgaging activity.

The number of new loans approved for people remortgaging also continued to slide, dropping to 31,800, down from a recent average of 41,054, as people opted to stay on their lender's standard variable rate when their existing deal ended, rather than switch to a new mortgage.

The 8% jump in mortgage approvals for people buying a new home adds to growing evidence that activity in the housing market has now passed its worst.

It comes the day after figures from the Land Registry showed the rate at which house prices are falling may be moderating, with the average home in England and Wales losing 0.3% of its value during April, the smallest drop for more than a year.

Nationwide also recently reported a 1.2 per cent jump in UK house prices in May, the second increase in three months, while property intelligence group Hometrack also said they remained unchanged during the month.

But despite the run of positive data on the housing market, economists remain cautious about the prospects of a recovery.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "The further rise in mortgage approvals from last November's record lows reported by the Bank of England ties in with now widespread evidence that housing market activity is trending up modestly."

But he said the increase needed to be put in perspective, with approvals for house purchase still 22 per cent lower than they were a year ago, and less than half the average level of 98,000 a month seen between 1993 and 2007.

He said: "Despite the recent limited pick-up, mortgage activity is still down at a level that is consistent with falling house prices.

"Furthermore, despite steadily rising buyer interest, we believe that the pick-up in actual house purchases is likely to be be gradual and fitful for some time to come given still poor economic fundamentals and ongoing tight credit conditions."

Vicky Redwood, UK economist at Capital Economics, said: "April's household borrowing figures provide further evidence that housing market activity is gradually strengthening, but the big picture is that it remains extremely subdued.

"The latest rise in house prices looks more likely to reflect monthly volatility than the start of a sustained upturn."

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