Rise in mortgage approvals ... but lending set to tighten
The number of approvals for new house purchases has defied expectations by rising to its highest point in almost two years, but economists warned of deals becoming more restricted as banks tighten lending conditions.
Loan approvals for house purchase rose to 52,854 in November with a total value of £7.6bn, the second monthly rise in a row and the highest figure since December 2009, the Bank of England figures showed.
But the number of loans for remortgaging declined for the second month in a row to reach 31,154, worth £4.1bn overall, the lowest figure since June last year.
Samuel Tombs of Capital Economics said the increase in new mortgage approvals from 52,786 a month earlier defied the widely-held expectation for a fall.
But he added: "We fear that approvals for new house purchase might soon start to fall as banks further restrict the availability, and raise the price, of credit in response to the deterioration in wholesale funding markets."
Mr Tombs said the remortgaging figures were an indication that this could happen.
He continued: "Indeed, with the labour market on course to deteriorate rapidly in 2012 and the eurozone crisis showing no signs of abating, it seems likely that housing market activity will remain pretty weak."
Meanwhile, the amount borrowed on credit cards was broadly unchanged in November, while other loans and advances rose by £400m, which economists suggested could be due to "stressed borrowing" in the run-up to Christmas.
David Braithwaite, director at Citrus Financial Management, suggested the fall in remortgage activity could be due to declining equity levels in homes.
He added: "Looking forward, 2012 will be about matching willing borrowers with reluctant lenders. At best we'll be moving sideways. The problem is that borrowers are hesitant to borrow and lenders aren't overly keen to lend."
Howard Archer, chief European and UK economist at IHS Global Insight, said that, despite rising modestly in November, unsecured consumer credit remains "extremely low" compared with past levels.
He said: "The overriding impression remains that consumer appetite for new borrowing is very low."