Mortgage approvals on the increase
There were 58,242 mortgage approvals for house purchases in May worth a total £8.7 billion, the Bank of England's Money and Credit survey showed. That was up from 54,354 in April and the highest level since December 2009.%VIRTUAL-SkimlinksPromo%
But loans to non-financial firms fell by £1.3 billion in May, including a £452 million drop in lending to small and medium-sized companies. However, that was an improvement on a £3 billion fall in business lending in April.
The home loans figures reflect an improving housing market - boosted by the Funding for Lending (FLS) and Help to Buy stimulus schemes - and coincide with Mark Carney's first day as governor of the Bank of England.
The Government and Bank's FLS, which gives lenders access to cheap finance in order to help borrowers, has been credited with helping free up the credit logjam to home buyers since its launch last August.
Chancellor George Osborne also launched the Help to Buy scheme in March, which allows people to buy a newly built home with a deposit of just 5%. It will be followed with a guarantee scheme, where the state takes on the risk of a borrower defaulting, although it has faced criticism over inflating a house price bubble.
IHS Global Insight chief UK and European economist Howard Archer said the figures echo evidence that housing market activity "may finally be really stepping up a gear".
Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM Club, said: "Improving mortgage availability will not only help those at the bottom of the market, but also those further up who have been struggling to establish chains because of a lack of buyers. The real challenge now is to get housebuilding moving and we would hope that signs of increasing activity and rising prices would be enough to nudge the housebuilders into action."
However, economists said shrinking business lending highlights to Mr Carney one of the main problems facing the UK economy.
Dr Archer said: "The further appreciable drop in net lending to non-financial companies in May suggests that the Funding for Lending Scheme continues to have very limited impact at best in supporting bank lending to companies. Low lending levels to companies has also clearly reflected limited demand as well as supply factors. How much companies want to borrow going forward remains questionable, but if the current signs of economic improvement are sustained it seems highly likely that demand for credit will gradually pick up."