Mortgage Approvals up during January marking steady start to the year.

The British Banking Association has released statistics on mortgage transactions for January 2012.
The number of mortgage approvals in January 2012 was the highest seen in two years, according to the British Bankers’ Association.   The figure of 38,092 is 34% higher than the figure for January 2011 (36,553).  There were 1539 more approvals than in December 2011 and the figure was also much higher than the six-month average figure of 34, 961. 
Gross mortgage lending in January was £8.3 billion.  This represents a 2.2% increase from January 2011 and is the same level as the six-month average, but is slightly down on the figure for December, when lending was £8.9 billion.
Remortgage levels remained static compared with December’s figures, at 21,129.  This figure remains lower than the six month average of 24,002.
David Dooks, the Statistics Director at the British Banking Association commented that the increase in house purchase mortgage approvals may be due to “people try[ing] to complete transactions before the stamp duty holiday ends in March”.
The stamp duty holiday for first time buyers on properties under £250,000 will finish on 24 March.  This represents an extra cost of up to £2500 for purchases that miss out.
The CML notes that Housing market activity has been a little stronger, but the pick-up is comparatively recent and from a low base.  It also suggests other reasons which may explain an increase in activity, including the easing of inflationary pressures and improving funding market conditions.
The European Central Bank (ECB) in December moved to provide 500 billion euros of three-year funding which has helped market conditions improve since the beginning of the year as well as staving off a euro-zone crisis.  Another three-year operation is planned and this should help to remove the pressure on UK banks to tighten pricing and availablility of mortgages.
Inflation has fallen back sharply over the last few months and at 3.6% is now nearly 2% less than its peak in September.  As inflation slows this may help to lift consumer confidence and be a determinant of future growth. 
The statistics from the BBA show an improvement in the housing and mortgage market, which is welcome.  The next few months will show whether this is an artificial increase due to the stamp duty holiday ending, or if it is signs of the beginning of a recovery.   
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