New home loans surge to highest figure since January

Some 53,710 approvals worth £8bn were made for house purchase, marking the highest number seen since January, the Bank of England reported.

The report adds to a series of studies indicating that confidence is returning to the housing market and that people are finding it easier to get access to a mortgage.

On Thursday building society Nationwide reported that house prices had recorded their strongest year-on-year growth in 18 months in May.

The number of mortgages on the market has sharply increased and lenders have slashed their rates to some of their lowest ever levels since the Government launched its Funding for Lending scheme last August, which gives lenders access to cheap finance.

Other schemes called NewBuy and Help to Buy have also been introduced specifically to give people with smaller deposits a helping hand.

The Council of Mortgage Lenders has been reporting increased first-time buyer numbers in recent months and estate agents have also said more “serious” buyers are entering the market.

Despite the recent uplift, Howard Archer, chief European and UK economist for IHS Global Insight, said the continued squeeze on household finances from low wage growth and high living costs will still act as a drag on housing market activity.

He said: “While a moderate rise in house prices over 2013 looks ever more probable, a strong upward move remains unlikely given a still challenging and uncertain economic environment despite the recent signs of limited improvement.”

The Bank’s figures also showed that credit card lending fell back to the lowest levels seen since last October, with a £102m increase recorded in April.

Lending on personal loans and overdrafts increased by £422m, which was the highest figure seen since the Christmas period.

Analysts have said there is generally still a strong desire among consumers to pay down their debts and shore up their savings amid the uncertain economy.

Figures released by the Building Societies Association (BSA) yesterday showed that savings accounts held by its members saw a “strong” £2.6bn net increase in the first four months of this year – compared with a £1.4bn reduction over the same period in 2012.

This is despite the poor returns generally on offer to savers in the low interest rate environment.

Experts have said the Funding for Lending scheme has made the situation even tougher for savers because providers have become less reliant on having to attract their deposits.

BSA director-general Adrian Coles said: “Given the mixed bag of factors affecting the savings market, including interest rates, consumer prices and wages it is unclear if the strong savings inflows will continue for the duration of the year.”