Housing market enjoys boost as mortgage approvals climb to five-month high

25th March 2015

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The amount of mortgages taken out rose for the second consecutive month during February according to the latest statistics from the British Bankers Association (BBA) indicting that UK housing market activity is beginning to increase once again.

The BBA numbers highlighted that mortgage approvals for house purchases rose in February to 37,305, hitting a 5-month high but they were still substantially, at 24.2%, below January 2014’s peak. February’s total was up from 36,527 in January and a 20-month low of 35,801 in December.

The falling back of mortgage approvals from the January 2014 high was clearly influenced appreciably by the introduction of the new Mortgage Market Review (MMR) regulations that came into effect in April 2014. These regulations put greater onus on mortgage lenders to assess the ability of potential borrowers to meet their initial and future mortgage payments.

However, IHS Global Insight chief UK and European economist Howard Archer noted that the fact that mortgage approvals continued to trend down to be at a 20-month low in December 2014 – after lenders had got to grips with the new mortgage regulations – “pointed to a clear, marked underlying moderation in housing market activity”.

He said: “House price increases have been reined in by the appreciable moderation in housing market activity from the peak levels seen at the start of 2014, although latest data have shown signs of becoming more variable.”

Archer cited the latest data from the Nationwide, which showed that prices edged down 0.1% month-on-month in February after increases of just 0.3% in January and 0.2% in December. The year-on-year increase in house prices moderated to a 17-month low of 5.7% in February from 6.8% in January, 7.2% in December, 8.5% in November and a peak of 11.8% in June – the highest since January 2005.

Meanwhile, the Halifax reported that house prices dipped 0.3% month-on-month in February after surprisingly jumping 1.9% in January..

Archer added: “The second successive rise in mortgage approvals reported by the BBA reinforces our belief that the housing market is now gradually turning around after weakening during much of 2014. It is also notable that latest survey evidence from the Royal Institute of Chartered Surveyors (RICS) show that buyer enquiries stabilized in February after falling for seven successive months.

“The RICS survey also showed that agreed sales rose marginally in February and January, which were the first increases since July 2014. With housing market activity seen gradually picking up over the coming months, we forecast house prices to rise by around 5% in 2015.”

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