Signs of recovery as new mortgage deals leap by 19%
THE first signs of recovery in the housing market emerged today with a sharp rise in the number of new buyers.
Mortgage approvals for home purchases jumped by 19 per cent last month to a nine-month high of 37,937, according to the Bank of England.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "Housing market activity has very likely bottomed out."
Recent reports from estate agents had suggested interest in property was soaring, but until now there had been little evidence to show this was translating into sales.
Andrew Montlake, director of independent mortgage broker Coreco, called the rise in mortgage approvals an "encouraging sign".
He said: "They lend credence to the claim that the bottom of the property market is fast approaching."
However, he added that many would-be buyers are being frustrated by the large deposits required by banks.
"Many people are now looking to take advantage of low house prices and mortgage rates and the only thing holding them back is the banks themselves," he said.
"If the Government is genuinely serious about helping first-time buyers and borrowers generally, then it needs to act now and competitive, sensible lending up to 90 per cent loan-to-value is the place to start."
Other analysts were more cautions pointing out that the number of mortgage approvals was still 44.1 per cent down on February last year.
Vicky Redwood, UK economist at Capital Economics, said approval levels would need to double before there could be an end to the slump which has seen London prices fall by 20 per cent since the market peaked in summer 2007.
Re-mortgaging activity continued to decline last month, with 32,633 people switching to a new deal, compared with the six-month average of 52,780.
That is probably due to many people staying on low standard variable rates as they come to the end of fixed-term mortgage deals.
The positive news on mortgages came amid warnings that consumers were "excessively" hoarding money in the face of job insecurity, potentially prolonging the recession by undermining the Government's plan to spend its way to recovery.
Britons repaid £245 million of consumer credit last month - the largest figure since records began in 1993.
Consumers also pumped an extra £1,595 million into building society savings accounts .
The proportion of their income that households save is likely to grow, Mr Archer warned as people try to sort out their finances in the face of economic uncertainty.
Richard McGuire, fixed income strategist at RBC Capital Markets, said: "The pay-back of consumer credit accentuates concerns that 'excessive saving' will both prolong the current recession and limit the effectiveness of the quantitative easing project."
