Boost as mortgage approvals increase

Some 55,785 loans were approved for house purchase last month, marking the highest figure since January last year, Bank of England figures showed.

Credit card lending increased by £232m in December, while lending on personal loans and overdrafts increased by £417m.

Both of these figures are the highest since September and analysts said they suggest many households turned to these types of credit to stretch their finances over Christmas.

The Government launched a multi-billion pound scheme in August to boost lending to households and businesses by giving lenders access to cheap finance.

The number of mortgages on the market has since increased and lenders have been slashing mortgage rates.

Lenders have also reported a recent uplift in lending to the first-time buyer sector. Estate agents and lenders have said they expect sales to pick up this year as a result of the improvements, although predictions about the direction of house prices have been more mixed.

Howard Archer, chief European and UK economist for IHS Global Insight, said consumers’ appetite to take on new borrowing still appears to be weak, despite the increase in consumer credit in December, which includes credit cards, personal loans and overdrafts.

Overall, consumer credit increased by £649m in December, above the average over the last six months but still well below longer-term levels.

Dr Archer said: “To put this into perspective, December’s increase compares with an average monthly increase of £863m since 1993.

“The impression remains that consumer appetite for taking on new borrowing is limited while there is also an ongoing strong desire of many consumers to reduce their debt.”

Melanie Bowler, an economist at Moody’s Analytics, predicted that mortgage lending will remain a “key driver” to improvements in lending to consumers throughout 2013.

She said the pick-up is largely down to the Government’s Funding for Lending scheme but banks are likely to remain cautious about lending to “risky” borrowers.

“On the face of it, those figures would support the Bank of England’s claims that the FLS is starting to make its presence felt,” said Peter Dixon, economist at Commerzbank.

“We would need to see a few more months of good data before we can validate the claim, but at least we’re moving in the right direction.”

Adrian Anderson, director of mortgage broker Anderson Harris, said that some lenders have recently brought out innovative deals aimed at people with lower deposits.

He highlighted Barclays’ ‘springboard’ mortgage, which allows people to buy a house with a 5 per cent deposit provided that their parents offset their savings against the mortgage. These savings are ringfenced and are then handed back.

The Building Societies Association (BSA) also released figures yesterday, which showed that £3.02bn worth of mortgages were approved in December, including lending for house purchase and remortgaging.

This shows a strong uplift compared with £2.45bn worth of mortgage loans approved in the same month a year earlier.

Adrian Coles, director-general of the BSA, said: “Mutual lenders such as building societies are likely to continue to play a prominent role in the mortgage market in 2013, helped in part by the Bank of England’s Funding for Lending Scheme.”