British mortgage approvals rose last month for the first time in over a year, data showed this afternoon, although the slight pick up from August’s record low does little to suggest the housing market is about to recover.
Mortgage lending last month was more than twice market forecasts, according to Bank of England figures, but that followed a downward revision to August which showed the first net repayment since the series began in 1993.
The BoE said mortgage approvals for house purchase rose to 33,000 last month from a record low of 32,000 in August, the first rise since June 2007.
While the figure was marginally higher than expected, approvals are running at a third of their level a year ago, suggesting further weakness in the housing market - especially given the recent escalation in the financial crisis.
"The mortgage approvals data show a market bumping around on the bottom," said David Page, an economist at Investec. "This is certainly nothing like an inflection point and we see this demonstrating an economy that is severely credit constrained."
As such, the data are unlikely to alter expectations the BoE will cut interest rates next month, after a 50 basis point cut to 4.5 per cent this month.
With fears growing over how severe the global economic downturn will be, markets are pricing in British interest rates falling as far as 2.5 per cent by this time next year.
Net mortgage lending rose by £2.167 billion in September, more than twice analysts' forecasts but still a fifth of what it was last year.
The BoE also revised down its August figure to show a fall of £691 million, indicating banks' mortgage lending had weakened so much that British homeowners were paying off more of their existing mortgages than banks were issuing new ones.
Analysts said August's figures were particularly weak due to speculation the government was about to raise the threshold at which stamp duty is paid on property purchases.
Reuters