Mortgage approvals up 1.5% in July but property market still 'stuck in deep rut'
The number of mortgage approvals in the UK increased to a 14-month high in July, but fears about the health of the housing market persist.
Mortgages approved for house purchases increased 1.5% to 49,239 in July, up from a four-month low in April, the Bank of England said.
But this represented a slowdown on the previous month, when the rate increased by 4%.
The number of approvals for remortgaging was virtually flat, after increasing by just 20 to 30,810, as the threat of an interest rate hike began to recede.
This was lower than the average over the past six months of 31,340.
Howard Archer, chief UK economist at IHS Global Insight, said: "Despite mortgage approvals rising to a 14-month high in July, housing market activity remains very low compared to long-term norms.
"With consumer confidence weak and the economic outlook currently looking pretty grim, we see little reason to change our view that modest falls in house prices are more likely than not over the coming months."
He added that mortgage approvals have averaged around 90,000 a month since 1993, while a level of 70,000-80,000 has in the past been considered consistent with stable house prices.
He expects house prices to fall by around 5% by mid-2012 as a result of "troublesome economic fundamentals and low consumer confidence".
Brian Hilliard, an economist at Societe Generale, said interest rates have fallen but consumer confidence is "very low" and the market is "still overvalued".
He added: "This is a recipe for continuing weakness.
"The housing market is stuck in a deep rut and there is little prospect of any major improvement any time soon."
The figures come on the day that the National Housing Federation predicted that levels of home ownership would slip over the next decade as a shortage of homes drives a rise in prices.
Gardner, director of mortgage brokers Obligo, said the property market is "now almost completely stagnant".
He added: "Persistently low interest rates and a steady trickle of enticing deals from lenders are being drowned out by the drumbeat of bad economic news."
Meanwhile, the Bank said that the amount of unsecured consumer credit rose by £205 million in July, which was the lowest level since January and down from an increase of £378 million in June.
Credit card lending rose by £259 million, while there was a repayment of £54 million in other loans and advances as consumers tried to pay down their borrowings and banks reined in their lending.