Mortgage approvals up 19%

February figures offer hope to property market

February gave hope to many as the number of mortgage approvals leapt by almost 20%. It also marked a time when borrowers repaid a record amount of their debt, said the Bank of England.

Home loan approvals hit 37,937, up from 31,791 in January and above the six-month average of 31,500 – the highest level since May 2008, the Bank of England said.

The record amount of loans being repaid is an indicator of the insecurity sweeping the nation. Consumers are bracing themselves for tough times as wage cuts and job losses make the headlines on a daily basis. Repaying debts has suddenly become a priority in incase redundancy strikes, making net loan repayments the highest on record.

Britons repaid £245 million in credit during February, compared with a net borrowing rise of £165m over January.

People also seem determined to save rather than spend. Building Societies reported a steep increase in deposits last month as consumers came looking to safeguard their money. Deposits of £1,595m were deposited in building society accounts during February - the highest February net receipt on record.

Brian Morris of the Building Societies Association said: “The record February net receipt of £1.6 billion shows that building societies’ attractive savings products are helping them to compete for deposits. Despite the bank rate being so low people are still keen to save, probably in response to the uncertain economic outlook and reduced job security.”

Gross mortgage lending by building societies in February was £1,214 million, compared to £3,861 million in February 2008.

The surge in mortgage approvals has attracted a positive message from many economists who are quick to suggest the worst may be over for the housing market. Vicky Redwood, of the UK economist at Capital Economics, however said for house values to stop falling the pick up activity would have to be substantially greater. House prices have tumbled by 20% since the market peaked in summer 2007.

“Housing market activity may finally have turned a corner. This might suggest that the pick-up in new buyer enquiries is feeding through into actual activity.

With new buyer enquiries still rising, this is clearly quite promising,” she said.

“However, approvals have a long way to go before they get to levels that are no longer consistent with falling house prices.”