Mortgage approvals is up in February

by Mark Johnston

It was revealed recently that there was a slight rise in the number of mortgages in the market during the second month this year.  The British Bankers Association (BBA) revealed that new mortgages in February were up marginally. 

The number, according to the BBA, was up to 29,923 for February, which was up marginally on January’s figure of 29,159.  This is a slight increase but still not the 29,350 that some economists had forecast.  This said, for the year, the mortgage market is still limp and down a full 11 per cent on the year. 

Re-mortgages were up in February when compared to Januarys 26,417 figures.  Commenting on the latest figures the BBA’s statistical directory, David Dooks, said that “Mortgage lending remains subdued, with only re-mortgaging on an upward trend, as borrowers lock into lower rate products currently available.”

These figures echoed a report recently issued by HM Revenue and Customs (HMRC) which indicated that there was a slight increase in the number of homes sold in February. 

The Bank of England (BoE) has noted that 46,976 loans have been approved in February, up when compared to January’s 46,152.  This approval rate was broadly in line with the expectations forecast at 46,800. 

This slightly positive news is still not the progress that is needed and the housing market is still expected to remain unresponsive all through 2011.  The demand for mortgage loans is expected to remain low as the uncertainty persists around the housing market, public deficit and the new government’s plans to put the UK economy back on track.

In line with these concerns what the fact that the national economy contracted by 0.5 per cent in the last few months in 2010, this was a little better than hoped.  The Office for National Statistics (ONS) revealed that the latest estimate was at 0.6 per cent. 

The Council of Mortgage Lenders (CML) is also a little concerned at the continued slump in the mortgage market.  They advised that mortgage lending totaled £9.5 billion for February, representing an only notational increase from January 2011.

The CML recently remarked that the housing market was “stuck in a rut” and that fears of inflation, the struggle of the pound currency market and the low confidence that the general public has in market progress and economic improvement.  The CMB has remarket that the mortgage market is unlikely to rally in the next 12 months and that the UK economy and public will have a “challenging year for households and the housing market.”

The Bank of England has warned the UK that there is a distinct likelihood that inflation may soon e above 5 per cent.  This may even happen within the next few months and adds more emphasis behind the push to raise interest rates.

Member employed by the BoE are divided as to when and how high rates should rise but they are all fairly certain that the Base Rate will need to rise to counteract potential soaring inflation figures.

The Inflation Report, delivered in February, noted that the inflation forecast peaked at 4.5 per cent in the three months leading up to September.  However, in the minutes taken during the recent Monetary Policy Committee, it became clear that they were issuing caution and warned that “a significant risk that inflation would exceed 5 per cent in the near term”.

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