Housing market ‘may have turned a corner’ as mortgage approvals rise
Mar 31 2009 by Alun Thorne, Birmingham Post
Activity in the housing market showed signs of picking up during February with the number of mortgages approved for house purchase jumping by nearly a fifth.
A total of 37,937 loans were approved for people buying a home during the month, 19 per cent more than in January and the highest level since May last year, according to the Bank of England.
The unexpected increase, which beat analysts’ expectations, suggests reports from estate agents of a surge of interest in property from potential buyers is beginning to translate into sales.
It prompted economists to say activity in the housing market may now have bottomed out, although they cautioned that a recovery was likely to be some way off, particularly as unemployment rises.
In a further sign of the economic uncertainty, consumers repaid a record amount of debt during the month. The level of outstanding unsecured debt on credit cards, loans and overdrafts fell by £245 million in February, only the second decline since records began in 1993.
But in a further sign of the pick-up in mortgage activity, the Bank of England also reported a rise in net mortgage lending, which strips out redemptions and repayments, to £1.51 billion, up from £1.08 billion in January.
The jump in mortgage activity is in line with figures released by the British Bankers’ Association last week showing the number of mortgages approved by the major banks for people buying a home rose during February for the third month in a row.
Vicky Redwood, UK economist at Capital Economics, said: “February’s household borrowing figures suggest that housing market activity may finally have turned a corner.
“The rise in the number of mortgage approvals for new house purchase might suggest that the pick-up in new buyer inquiries is feeding through into actual activity.”
Despite the pick-up, approvals for house purchase were still 44 per cent lower than in February 2008.
The figures came as property intelligence group Hometrack reported a slowing in the rate of house price falls during March. House prices in England and Wales dropped by 0.6 per cent, the lowest fall for ten months, while both the number of potential buyers registering with agents and the number of sales agreed continued to rise.
Howard Archer, chief UK and European economist at IHS Global Insight, said: “The further limited rise in mortgage approvals from last November’s record lows, and reports from estate agents that buyer inquiries have recently picked up appreciably, suggests that housing market activity has very likely bottomed out.”
But he added that any recovery in activity was likely to be “gradual and fitful for some time to come”.
