Mortgage approvals at year high

Estate agents windowMortgage approvals to buy a house have risen to their highest numbers since the start of the year, in further signs that an £80 billion Government scheme to boost lending is having an impact.

There were 33,039 approvals for house purchase worth £5.2 billion in October - the highest number seen since January when the prospect of a stamp duty concession for first-time buyers ending prompted a rush of sales.

The figures were contained in the British Bankers' Association's latest high street banking report, which said that overall, net lending remains "subdued" as people are still making high repayments and shoring up their savings as a "buffer against uncertainty".

The £80 billion funding for lending scheme was launched by the Treasury and the Bank of England at the start of August to kick-start lending to households and firms by giving lenders access to cheap finance.

The scheme has already caused an increase in mortgage availability and seen lenders slash their mortgage rates, although much of the strongest competition so far has been aimed at borrowers with bigger deposits.

Howard Archer, chief European and UK economist at IHS Global Insight, said: "The recent signs of modestly improving housing market activity and the likely increasing beneficial impact of the funding for lending scheme led us to believe that house prices are now likely to be essentially stable over the coming months, rather than drift down gradually.

"However, we still suspect that any significant, sustainable turnaround in house prices is still some way off."

The figures come after the Council of Mortgage Lenders reported earlier this week that mortgage lending reached an 11-month high in October, suggesting funding for lending has made an "early positive impact".

The BBA's report also showed a slight upturn in re-mortgage approvals, with 20,112 approvals in October worth £2.7 billion, representing the highest numbers seen since the spring.

A string of lenders have announced increases to their standard variable rates in recent months, resulting in more than a million home owners facing increased mortgage costs. However, people could find it harder to switch to a cheaper deal as lenders have also toughened their borrowing criteria amid the weak economy.