Rise in mortgages is a false dawn, say experts

A recovery in the housing market remains months away, despite the first increase in the number of new mortgage approvals for seven months, City economists said last night.

The Bank of England said mortgage approvals, an indicator of house prices in the near future, rose in December - to 83,000 from 77,000 the month before.

City analysts said, although this number was higher than anticipated, the three-month moving average remains at its lowest level since early 1996.

Ross Walker, UK economist at the Royal Bank of Scotland, said: "The underlying trend continues to signal cooling demand and activity in the housing market and December's modest bounce is unlikely to mark a turning point in these data."

The rise in the number of approvals could be due to a re bound from an unusually weak November.

Net mortgage lending in December rose to £7.1bn, more than the £6.5bn rise the previous month. Annual growth for secured lending slowed to 13% in December, down from 13.4% in November.

The data follows reports that the bottom of the housing market has been reached, after months of weak reports, but most analysts believe the market will continue to cool.

Consumer credit rose by £1.5bn in December, an increase of 0.8% on the previous month.

The annual growth rate edged up to 12.1% from 11.7%, the fastest growth for four months.

Credit card borrowing, however, was weaker in December: a rise of £562m compared to £694m in November - the weakest since April.

Separately, a survey showed retail sales had made a slow start to January, with momentum running out after the first week of the year.

Research group SPSL's retail traffic index said traffic was down 5.2% in January compared with the same period a year ago, the greatest drop since March 2003 when the Iraqi war began. Sales last month decreased by 24% from December.