Decline in mortgage approvals

03/04/13

By Dan Machin

Mortgage approvals fell to a five-month low in February, despite recent signs of improvement in the housing market.

There were 51,653 approvals for house purchases, worth a total of £7.7 billion during the month, according to the Bank of England's Money and Credit survey, continuing a decline which began at the beginning of 2013.

This number, which is the lowest total seen since September last year, is significantly down on the 11-month high of more than 55,000 in December.

A number of Government schemes to unblock the flow of credit have recently given the housing market a boost.

For instance, the number of mortgages on the market has increased by around one third since the Funding for Lending scheme was launched in August 2012, giving lenders access to cheap finance in order to help borrowers.

However, mortgage levels are still way below the average of more than 85,000 a month seen for the last 20 years.

In an attempt to boost the market further, the Government has announced plans for a new Help to Buy scheme in its recent Budget, which will help more people to buy a home with just a 5 per cent deposit.

But Howard Archer, chief UK and European economist at IHS Global Insight, said the continued tough state of the economy is likely to weigh down on house prices in the coming months.

"House prices may very well eke out a small gain over 2013 supported by modestly increased activity," he said. "However, it remains hard to see house prices making a decisive move upward in 2013 given the still difficult and uncertain economic environment."

Figures also showed that credit card lending increased by £223 million in February, as Britons turned to their plastic in order to get by.

The rise is on a par with that witnessed in December during the Christmas period, while personal loan and overdraft lending also jumped by £416 million.

Experts claim the increases are in line with recent surges seen in retail sales and could suggest that consumer confidence is lifting slightly, with people a little more prepared to dip into debt than they previously were.

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