Mortgage approvals point to stabilising market

Mortgage approvals rose in March to their highest figure in seven months, Bank of England figures show today.

The seasonally adjusted figures showed that approvals for house purchase - loans agreed but not yet made - increased to 91,000 last month from 86,000 in February, the highest total since August 2004.

Mortgage lending growth was steady at ?7bn, lower than the ?7.1bn expected, and at 11.7%, slightly down on February's increase of 12.1%.

The number of remortgages fell to 90,000 in March, down from 94,000 in February and 6,000 under the six-month average.

The rise in approvals added to recent evidence suggesting that the housing market has stabilised after slowing in the second half of 2004.

Nationwide building society yesterday reported a rebound in the housing market, with a 0.9% rise in house prices in April. And Hometrack said this week that the market appeared to be stabilising after 10 months of consecutive falls in house prices.

But property sales appear to be relatively subdued, as buyers continue to negotiate on prices, and estate agents report an oversupply of property on their books.

Many lenders and estate agents have said that to stimulate activity sellers will have to be more realistic in their house asking prices.

Howard Archer, chief UK economist for investment firm, Global Insight, said that while it was still very much a buyers' market, sellers are more prepared to leave their house on the market rather than accept a lower price.

"Therefore, there seems little likelihood in the near term of a significant move back up in house prices, or in a sharp correction occurring," Mr Archer said.

Meanwhile, consumer credit in March was ?1.9bn, up on February's figure of ?1.6bn and in line with the previous six months. Net credit card lending was also within the last six-month average, while figures for other loans were stronger than in the past six months.

The rise in lending will increase the likelihood of a move upwards in interest rates next month, which the Bank's monetary policy committee will have to balance against evidence of April's weak retail figures, and calls from the Confederation of British Industry to leave the rate at 4.75%.