Mortgage approvals suffer surprise dip
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Your support makes all the difference.Lending data published yesterday by the Bank of England painted a confusing picture of the state of the economy ahead of the Monetary Policy Committee's decision later this week on whether to increase interest rates and expand its £200bn economic stimulus programme.
In a blow to the fragile housing market, the number of new mortgages fell for the first time in more than year in December. The Bank said that a total of 59,023 home loan applications were accepted during the month, down from 60,045 in November.
Some analysts put the fall down to the end of the year-long stamp duty holiday on homes worth between £125,000 and £175,000, but others said that the drop indicates a softening market. "The dip in mortgage approvals in December reinforces our suspicion that housing prices are likely to suffer a limited relapse during the coming months, and will be, essentially, only flat over the year as a whole," said Howard Archer, chief UK and Eurozone economist at IHS Global.
"While housing market activity was clearly lifted through 2009 by more affordable house prices and low mortgage rates, the upside continues to be limited by still broadly unfavourable economic fundamentals."
The Bank said that mortgage lending increased by £1.2bn in December, below the November hike of £1.6bn.
The figures come a week after the Nationwide said that year-on-year house prices had risen by 8.6 per cent in January. The Council of Mortgage Lenders said that the market was showing evidence of "bunching" as buyers rushed transactions through at the end of last year to beat the end of the stamp duty concession.
There was better news on unsecured consumer lending, which increased by £52m in December, the first monthly rise since June last year.
December is always considered a strong month for consumer credit as individuals use credit cards to finance Christmas spending.
The data published yesterday will give a headache to the MPC, which begins its two-day deliberations on Wednesday on whether to increase interest rates above their historic low of 0.5 per cent – the level set at the MPC's meeting last March.
The fall in mortgage approvals is likely to fuel calls for the nine-member committee to increase its £200bn quantitative easing programme and keep interest rates at the current level.
However, since the MPC's meeting last month, inflation has surged to 2.9 per cent and the economy has returned to growth, albeit by just 0.1 per cent in the fourth quarter of last year. The MPC is primarily charged with keeping inflation at the Government's target of 2.5 per cent.
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