Mortgage approvals for home buyers at six-year high

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THE number of mortgage approvals granted to home buyers continued to run at a six-year high in January amid improving consumer confidence, high street banks have reported.

Some 49,972 approvals for house purchase - worth £8 billion - got the go-ahead last month, a 6% increase on December, which was already the strongest monthly figure seen since 2007, according to the British Bankers’ Association (BBA).

Compared with January 2013, the number of mortgage approvals made to home buyers last month was 57% higher. Meanwhile, 22,972 approvals worth £3.6 billion were granted for re-mortgaging in January, which is a 51% increase compared with the same month last year.

The BBA said that mortgage assistance schemes are giving more first-time buyers a helping hand onto the property ladder, which is in turn helping to free up some housing chains as market activity rises.

The Government’s UK-wide Help to Buy mortgage guarantee scheme kicked off last October, offering state-backed mortgages to credit-worthy first-time buyers and home movers with only a 5% deposit saved.

The scheme has stimulated competition from both the lenders taking part and those outside the initiative that are looking to maintain their position. The choice of mortgage deals on the market for borrowers with a 5% deposit has tripled since the initiative was launched.

BBA statistics director David Dooks said: “Approvals for new purchases have climbed quite significantly and are now at their highest point since September 2007.

“Credit card spending is also on the rise, showing that consumer confidence in the economy continues to improve.”

Spending on credit cards in January was 12% higher than the same month a year earlier, with £8.4 billion worth of new purchases made and a lesser total of £8.2 billion paid back on cards during the month.

In each of the previous six months on average, the amounts consumers have been spending and paying back on their cards have remained broadly equal, with around £8.2 billion recorded in new spending and £8.2 billion in repayments.

Non-mortgage borrowing has increased by 0.7% over the last year. Within this figure, credit card borrowing has risen by 4.5%, outweighing a 2.7% contraction in borrowing on personal loans and overdrafts.

Meanwhile, the BBA’s figures also showed that net borrowing by non-financial businesses decreased by £317 million in January, slowing from a larger average drop of £839 million in each of the previous six months. A net £8.6 billion increase in borrowing was recorded by financial businesses.

Howard Archer, chief UK and European economist at IHS Global Insight said: “Hopefully, the recent slowing falls in lending to businesses is a sign that the trend is turning.

“With the UK sustaining a decent level of economic activity and prospects looking pretty bright, business demand for credit will likely pick up appreciably over the coming months.”