Four-month High on mortgage approvals

In April mortgage approvals rose to a four-month high as sunny weather and the ending of stamp duty on house purchases for first-time buyers helped boost demand. The increase in mortgage approvals within the last 12 months continues to be solid and thats to a degree been powered by ultra-low interest rates. Mortgage approvals could very well rise slightly over the next year.

The amount of mortgage approvals continues to be below its average over the preceding six months and is about half the total that were given at the peak of the U.K.s housing boom in 2007. Plans by Prime Minister David Camerons new coalition government to seek 6.2 billion pounds in spending cuts this year may worsen households finances and keep housing activity subdued.

Net consumer credit dropped 136 million pounds in April from March, the first decline since November. Credit card lending increased the least in seven months, while personal loans and overdrafts fell by 303 million pounds, the fastest pace in five months. While interest rates remain at a record low, banks have curtailed lending to help rebuild balance sheets after the financial crisis, making it harder for potential homebuyers to get loans.

The Council of Mortgage Lenders said on May 21 that credit availability is likely to remain restricted for some time. The Land Registry said yesterday that U.K. house prices rose 2 percent in April from March. Part of the boost to prices is due to a supply shortage. Hometrack said this week that prices in May rose 2 percent from April and highlighted a scarcity of housing for sale. The U.K. residential property market has endured a chronic lack of houses, which explains property price resilience.