May 27, 2005

Housing market retains weak pulse

by brian_turner

Banks have recorded a significant increase in the number of new mortgages approved, indicating that the housing market could be stabilising.

According to figures from the British Bankers Association (BBA), a total of 191,857 new mortgages, worth Â£17.2 billion were approved during April, a 2% increase compared with March, although still 17% lower than in April last year.

Net lending grew by Â£4.03 billion, taking into account redemptions and repayments. This is the smallest increase since early 2002.

The number of loans approved for house purchases increased to 69,323 in April, the highest level for 9 months, although still lower than the 87,800 loans approved in April 2004.

David Dooks, BBAâ€™s director of statistics, said that although the growth in net mortgage lending was still relatively weak, there were signs that the trend could be stabilising.

Howard Archer, Chief UK Economist said that buyers seem unwilling, or unable, to pay the prices being asked and sellers seem unwilling to reduce their prices, suggesting that housing market activity and house prices could remain subdued for some time. Mr Archer thought that a sharp housing downturn was unlikely unless the economy slows and unemployment rises significantly.

The BBA also said that net borrowing on credit cards totalled Â£7.1 billion in April, lower than the average of the previous six months. The reduction in borrowing may reinforce speculation that the Bank of England’s could reduce interest rates.

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