Boost for new mortgage approvals

House for saleMortgage approvals have hit a 25-month high after numbers were boosted by first-time buyers rushing to take advantage of a stamp duty holiday.

There were 58,728 loan approvals for house purchase in January, the highest figure since December 2009, Bank of England figures showed. Gross mortgage lending at £12.8 billion was higher than the six-month average, although approvals for remortgaging dropped off slightly to 31,952.
Estate agents and lenders have reported increased activity among first-time buyers in recent months as they try to take advantage of the two-year stamp duty exemption which runs out in March.
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Lenders have been offering some of their cheapest ever mortgage deals as the Bank of England keeps the base rate at a historic 0.5% low, although borrowing conditions are expected to tighten this year.

Capital Economics economist Samuel Tombs said the latest figures showed some improvement but remained consistent with the "pretty sluggish pace" of economic recovery.

He said: "Approvals were probably boosted by the stamp duty concession for first-time buyers. What's more, banks still only seem to have passed on a small fraction of the rise in their wholesale funding costs seen as a result of the situation in the eurozone. As a result, it seems likely that the number of approvals will fall back later this year."

Consumer credit saw a modest pick-up with a £148 million rise, reversing a net £46 million repayment last month but still standing at around half of the average increase seen over the last six months. Credit card lending remained flat in January, but other types of consumer loan recorded an increase of £151 million.

Howard Archer, chief UK economist at IHS Global Insight, said the figures remained low compared with long-term norms as people remain keen to pay down their debts due to worries about the economy and jobs.

Meanwhile, the Building Societies Association (BSA) reported £1.7 billion of mortgage approvals in January, a 54% increase on a year ago.

But savings balances fell sharply by £1.1 billion in January 2012, compared with a decrease of £400 million in January last year, following suggestions that consumers raided their cash pots to pay for Christmas rather than taking on more debt.

www.bankofengland.co.uk/(Bank of England)
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