Bank of England reports mortgage lending reaches 25-month high

Wednesday, 29 February 2012 10:14

Bank of England data shows that there was a sharp rise in lending to individuals in January and that mortgage approvals rose to a 25-month high signaling recovery in the housing market.

Total lending to individuals rose by £1.8 billion in January compared to a six-month average of £1.1 billion.

Lending for homes and mortgages increased by £1.6 billion compared to the previous six month average of £0.8 billion. The number of mortgage approvals increased to 58,728 in January, up from a six-month average of 52,839.

Howard Archer, Chief UK & European Economist at HIS Global said that the data pointed to an improvement in the property market: “With housing market activity trending up modestly and the economy showing signs of improvement, the downside risks to house prices are abating.

“It is evident that mortgage approvals are currently being lifted by first-time buyers rushing to complete before the stamp duty concession ends in March.

“We are trimming our forecast decline in house prices in 2012 to 3% from 5%. And we acknowledge that there is a growing possibility that house prices may not fall over 2012.”

This is partly due to an increase in house purchases as buyers try to beat the deadline for the end of the stamp duty holiday next month. Remortgages and approvals for other reasons fell slightly in January.

The Bank of England lending to individuals data for January showed a small increase in lending to consumers in the form of loans and credit cards. Consumer credit rose by just £0.1 billion compared to the six month average of £0.3 billion. Credit card lending was broadly unchanged, whilst loans and other advances increased by £0.2 billion.

Mr Archer said that this signals a reluctance of households to increase debt: “Despite picking up modestly in January, consumer credit remains very low compared to long-term norms which suggests that even though consumer confidence has improved from its lows, there is still very low appetite for taking on new borrowing and also on ongoing strong desire of many people to reduce their debt.”

Meanwhile, the bank’s data on M4 lending, the total amount of loans advanced to households and companies in the UK showed a big rise of £29 billion in January compared to an average monthly increase of £2.7 billion over the last six months.

This was made up by household loans increasing by £6.4 billion, an increase of £4.7 billion in lending to private non-financial corporations and an increase of £17.9 billion in lending to other financial corporations.

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