Date: Wednesday 30 May 2012
Mortgage lending rose slightly in April but was still well below the 25-month high seen in January, when buyers rushed to take advantage of a stamp duty holiday.
The Bank of England's figures show mortgage approvals for house purchases rose modestly to 51,823 in April from 51,067 in March.
This compared to the two-year high of 58,610 recorded in January.
Net mortgage lending totalled £1.1bn in April, up marginally from £1bn in March.
Dr Howard Archer, Chief UK Economist at IHS, said house prices were likely to fall slightly over the coming months in the face of weak economic fundamentals and low and fragile consumer confidence.
"Specifically, we expect house prices to fall by around 3% by the end of 2012," he said.
Archer added that some mortgage rates had risen recently due to lenders’ higher borrowing costs in wholesale markets and this could also weigh on housing market activity.
The minutes of the May meeting of the Bank of England’s Monetary Policy Committee noted that the average interest rate on a new Bank Rate tracker mortgage with a 75% loan to value ratio was around 50 basis points higher in April than in August 2011.
The Bank also reported that people took on just just £268m in unsecured debt in April, after that number spiked up to a 15-month high of £741m in March from £312m in February.
It added that the three month annualised growth rate in money supply - rate setters' preferred measure of the broad money supply - fell sharply from 7.1% to 3.8%.
Samuel Tombs UK Economist at Capital Economics said the weakness of money supply and credit growth continued to suggest that medium-term inflationary pressures were very weak.
Meantime, and over at Barclays, Chris Crowe is commenting that, “banks' efforts to strengthen their balance sheets have raised barriers to credit supply. For instance, in the mortgage market average loan-to-value (LTV) ratios have fallen sharply, particularly for first-time-buyers (FTBs; see chart below), and this is likely to keep mortgage approvals at depressed levels. Conditions may even worsen in the near term, as lenders pass on increases in funding costs by raising mortgage rates. However, we expect the economic outlook to strengthen gradually in H2 12, leading to a slow thawing in the frozen mortgage market and a resulting pick-up in housing transactions and prices in 2013.”
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