Mortgage approvals show signs of recovery
Published: 6th February 2015
Mortgage approvals picked up during December as buyers returned to the housing market, all figures as per January 30, 2015.
A total of 102,910 home loans were in the pipeline during January, the highest level since August last year, according to the Bank of England.
The increase was driven by a rise in the number of mortgages approved for people buying a home, with these increasing to a three-month high of 60,275.
There was also a jump in the number of people remortgaging, as intense competition among banks and building societies led to rates being slashed in the final quarter of 2014.
The pick up in mortgage approvals reported by the Bank of England contrasts with data from the British Bankers’ Association, which showed a further fall in pipeline loans in December.
The figures suggest building societies and smaller lenders increased their market share during the month.
The rise in mortgage approvals is good news for the housing market, which had been slowing since the second half of last year.
But economists have predicted that activity levels will begin to rise again in 2015, as earnings growth outstrips inflation for the first time in many years.
The Bank of England has also signalled that it will keep interest rates at their current record low of 0.5 per cent for the foreseeable future, stressing that when it does start to hike the official cost of borrowing, any rises will be gradual.
Matthew Pointon, property economist at Capital Economics, said: “In contrast to the earlier BBA data, the Bank of England reported a rise in approvals for house purchase in December.
“With mortgage rates at record lows, and consumer confidence at seven-year highs, that recovery is set to continue.
“That said, with banks still in a cautious frame of mind and house prices very high in relation to earnings, we are unlikely to see a return to boom-conditions in the market.”
Despite the increase in approvals during the month, mortgage lending in December remained subdued, the Bank of England said.
Total advances were broadly unchanged at £16.6bn, while net lending, which strips out redemptions and repayments, dropped to £1.6 billion, down from £1.9bn in November.
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