Mortgage Demand Rise Points To Stabilising Market 29/04/2005

The Bank of England released details of an increase in mortgage approvals for March today, adding to evidence that the housing market was recovering.

The Bank said the seasonally adjusted figures show that approvals, loans agreed but not yet made, rose to 91,000 in March, the highest level since August last year and up 6% from 86,000 in February.

Mortgage lending growth was slightly down on February, but still stable at £7 billion. The number of remortgages fell to 90,000 in March, down from 94,000 in February and 6,000 under the six-month average.

These figures, along with those released recently by Nationwide and Hometrack, suggest that the housing market has stabilised after slowing in the second half of 2004. Yesterday, Nationwide building society reported a 0.9% rise in house prices in April and Hometrack earlier in the week suggested that the market appeared to be stabilising after 10 months of consecutive falls.

Global Insight, a City research company, said that the mortgage market had remained pretty subdued compared to this time last year, with buyers holding the upper hand. Chief UK economist at Global Insight, Howard Archer, explained: "Very few vendors are currently having to sell because of distressed reasons and therefore are more prepared to leave their house on the market rather than accept a lower price. Therefore, there seems little likelihood in the near term of a significant move back up in house prices, or in a sharp correction occurring."

Geoffrey Dicks, UK economist at RBS Financial Markets said: "You'd be hard pressed to say the housing market is spiralling down. If anything it may be stabilising and showing that normal spring bounce."

Meanwhile, consumer credit in March was up £0.3 billion on February at £1.9 billion, suggesting that consumer confidence is returning to the High Street. Net credit card lending was within the last six-month average, while figures for other loans were stronger than in the past six months.

The figures are unlikely to sway the financial market's expectation that the Monetary Policy Committee will keep interest rates on hold at 4.75% in May, but it does support the argument for a further rate rise later in the year.