No January blues for mortgage lending
Mortgage lending bounced back during January as the property market recovered some of the ground it lost due to the severe winter weather in December, new figures have shown.
Net lending, which strips out redemptions and repayments, rose to £1.8bn, its highest level for a year and a significant turnaround from the previous month when it had contracted by £268m, according to the Bank of England.
There was also a 7% rise in the number of mortgages approved for house purchase, with these increasing to 45,723.
But despite bouncing back from December's 21-month low, the number of loans in the pipeline for people buying a new home were still lower than they had been in November.
They also remained well down on the 70,000 to 80,000 approvals a month which economists consider to be consistent with a stable housing market and are less than half the levels of more than 100,000 a month seen during the credit boom.
The figures came as Nationwide said the housing market was continuing to "tread water" after property prices edged ahead by 0.3% in February.
The increase, which was only the second gain recorded since May last year, left the average home costing £161,183.
But the group saw little reason to be optimistic, saying it expected the housing market to be "sluggish" during 2011.
Annual house price inflation remained in negative territory, with prices 0.1% lower than in February last year, although this was a slight improvement on the fall of 1.4% seen in the year to the end of January.
Demand for property has been hit by uncertainty over the future direction of both the housing market and the wider economy, keeping many potential buyers on the sidelines, while those who do want to go ahead with a purchase are continuing to struggle to raise the mortgage finance they need.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "A modest rise in mortgage approvals in January reported by the Bank of England and a small pick-up in house prices in February reported by the Nationwide represents some rare recent better data on the housing market.
"What it does suggest to us is that house prices are more likely to trend down gradually over the coming months rather than crash.
"This ties in with our long-held suspicion that house prices are likely to fall by around 5% in 2011 and end up losing about 10% from their peak 2010 levels before stabilising."