Mortgage approvals on the rise but market 'subdued'
The number of mortgages approved for house purchases rose to an eight-month high during March as activity in the property market showed signs of picking up, figures have revealed.
A total of 31,660 loans were approved for people buying a new home, 5% more than during the previous month and the highest level since July last year, according to the British Bankers' Association.
The data backs up anecdotal evidence from estate agents that potential buyers are beginning to return to the market ahead of the traditional spring bounce.
But despite the improvement, the figure is still down on the 35,124 mortgages for house purchases that were in the pipeline in March last year, while it is significantly below the 70,000 to 80,000 approvals a month that are considered to be consistent with a stable housing market.
Mortgage advances continued to be subdued in March, with total lending of £7.75bn, below both February's figure and the recent six-month average of £7.9bn.
Net lending, which strips out redemptions and repayments, also dropped to a three-month low of £846bn, well down on March 2010's figure of £2.62bn.
The BBA attributed some of the weakness to the fact that households remained focused on paying down debt, leading to people overpaying their mortgages.
The number of loans approved for remortgaging was slightly down on the six-month average at 24,764, but remained up on the levels seen during the first half of last year, as talk of future interest rate rises caused homeowners to review their mortgages.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "Despite the modest pick up in mortgage approvals reported by the BBA in March, housing market activity is still weak and far from supportive to house prices. Mortgage approvals were still down 9.9% year-on-year in March and were still essentially only just above half the average monthly level of 57,824 seen since 1997.
"This is consistent with our view that house prices are likely to trend down gradually further over the coming months."
Unsecured borrowing remained negative in March, as consumers repaid £38m more on credit cards, loans and overdrafts than they took on in new debt.