Property decline 'bottoming out

Mortgage lending rose in February, adding to evidence that the decline in the property market is bottoming out, experts said today.

Figures from the British Bankers' Association (BBA) revealed gross mortgage lending was ?11.9bn last month, a monthly rise of 3% but still 12% lower than February 2004.

Seasonally adjusted net mortgage lending - gross lending minus repayments - rose by ?4.8bn compared with ?4.2bn in January and ?5.3bn a year ago. This compares with an average of ?4.4bn in the previous six months.

There were 158,391 approvals (for all purposes) in February for a total value of ?13.1bn. In volume terms, these were 22% higher than January, but 25% weaker than February 2004. Loans approved for house purchase were 42% higher than January's very low figure, but still 35% lower than February 2004. The average approval for house purchase was ?119,000.

David Dooks, director of statistics at the British Bankers' Association, said: "While mortgage lending is clearly running at levels below those a year earlier, February's figures indicate the declining trend seen during 2004 may be bottoming out.

"We have seen the start of the seasonal upturn in loan approvals, albeit from a very low point in the case of house purchase loans, so it will be important to see how strong the usual Spring impetus will be in the coming months."

Howard Archer, chief economist at investment firm Global Insight, urged caution, asserting that firmer figures in February were largely due to the usual seasonal upturn in activity.

He said: "Indeed, the jump of 13,914 in the number of mortgage approvals in February is still well below the average 15,576 increase seen in February over the previous five years. Furthermore, at 47,365, the number of approvals in February is still significantly below the average February figure of 65,498 for 2000-2004."

"The BBA also confirmed that underlying lending secured on dwellings rose to ?4.8bn in February, from ?4.2bn in January. This is modestly above the ?4.5bn average increase over the previous six months, but well below the February 2004 level of ?5.3bn.

"Consequently, while there are some signs of stabilisation in the mortgage lending and approvals data for February, they are still pretty subdued overall. This points to further softness in prices in house prices over the next few months, although they are unlikely to fall sharply."

The data also showed that growth in overall net consumer credit weakened in February, rising by just ?0.7bn. The increase in loans and overdrafts (up ?0.7bn) was slightly above the recent monthly average of ?0.6bn, while credit card borrowing (?0.1bn) was noticeably weaker than both January and the previous six months' average.

Mr Dooks said: "Very weak growth in February's credit card lending was driven by consumers' lower spending, virtually identical in value to February 2004 and in line with slower reported retail sales."