Bank of England: Mortgage lending increases

After recent negative data on the housing market there was some finally some good news on the mortgage front today.

The Bank of England released its latest data on lending to individuals, and reported that in May the number of loans for house purchase increased, and overall mortgage lending grew faster than the six-month average.

And after the recent boom in remortgaging - as properties increased in value and interest rates rose - the recent stability in rates and prices (with neither having moved much in preceding nine months) meant that in May the number of people remortgaging fell.

"The Bank of England figures point to a stabilisation in the market following a modest recovery in activity since the lows of last winter," said Milan Khatri, Royal Institute of Chartered Surveyors economist.

He added that while the number of mortgage approvals was still down on last year, it had returned to its long-term benchmark figure.

"The number of mortgage approvals have been steadily picking up since last November's low of 77,000. The number of approvals have steadied at around their long-run average of 95,000 per month, though are still down 21 per cent from year ago levels and 28 per cent below the peak reached in December 2003," he explained.

Howard Archer, chief UK economist at consultancy firm Global Insight, added: "Following some recent softer data and survey evidence, the Bank of England mortgage lending and approvals data indicate that a modest seasonal upturn in housing market activity is continuing."

But despite this positive data, and the prospects of a cut in interest rates in the next few months, the housing market is not set to boom again, Mr Khatri warned.

"An interest rate cut in late summer, if implemented, will provide some support to the housing market later in the year, but there is little chance of a renewed boom in house prices," he said.