The British Bankers Association announced this week that the national rate of mortgage approvals has peaked at its highest level since September 2007, just before the housing market crash. What could this indicate concerning the sustained recovery of the UK economy?
Specifically, according to the association, the first month of 2014 saw the rate of house purchase approvals rise by a staggering 57% when contrasted with the same month of 2013. However officials also noted that levels house purchase approvals still lag 30% behind their pre-crisis figures.
These figures contribute to a four month long streak of net mortgage lending moving into positive territory; boasting higher numbers than remortgaging. This is a sharp contrast to most of 2013, which saw repayments outflank new payments significantly.
BBA statistics director David Dooks went on record commenting on how the government’s Help to Buy Scheme has had an impact on overall mortgage lending rates. He said that “following on from last month, mortgage borrowing continues to rise compared to a year earlier as mortgage assistance schemes help first time buyers and housing chains more generally.”
Matthew Pointon at Capital Economics quickly refuted that this could indicate a housing boom, suggesting that whilst London may be experiencing such a phenomena, the same could not be held true for the remainder of the nation.
Pointon commented that “the rise in lending is coming off a low base, and to date net mortgage lending has barely grown at all.” He then elaborated the point, adding that “with wholesale interest rates now drifting up, and the regulations from the Mortgage Market Review set to come into effect in late April, the chance of new countrywide secured credit boom developing is on the low side,”
However lending figures were not positive across the board, as according to the association, net lending to non-financial companies tumbled for the fourth consecutive month in January. Industry experts are seeing this as an indication that business investment remains somewhat stagnant.
This however does not account for the fact that the rate of this decline is slowing, according to official figures. January saw the rate of decline of net lending to non-financial companies markedly slow. Some sectors, most notably manufacturing, even saw the net lending rate rise.
In conclusion although overall lending figures are not quite as robust as some would hope, several sectors, including the housing market, have seen notable gains in the first month of 2014. This provides further evidence that the UK has entered sustained economic recovery.