 | House price recovery continuesArticle Published: 18:20 07/03/2006Article Classification: Waters Edge Cotswolds |
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House Prices Recovery Continues.
Mortgage lending remained strong in January and February amid further evidence that a shortage of homes for sale continues to support house prices
The British Bankers Association (BBA) reported that total mortgage approvals - the number of loans agreed but not yet completed - was 45,039 last month, down on December’s 51,233 but substantially higher than the 34,216 recorded in January last year. The figures came as the latest survey of the property market showed that house prices rose for the third successivemonth in February after a surge in the number of buyers and a general shortage of supply, particularly in the south of England.Average house prices gained 0.4 per cent last month, although there were considerable regional imbalances with most of the gains coming in London.
Howard Archer, chief UK economist at Global Insight, said last August's interest rate cut and speculation that rates could be trimmed further were also supporting prices. "The pick-up in housing market activity has clearly underpinned a recent firming in prices, and there is undeniably a growing risk that house prices could move markedly higher over the coming months," he said. "Indeed, this risk is clearly showing more prominently on the Bank of England's radar," he added.In February the Bank of England’s rate-setting Monetary Policy Committee kept the cost of borrowing unchanged at 4.5 per cent for the fifth month running despite a weak economy. The minutes of the Bank’s decision highlighted a growing concern that lower rates might further stimulate the housing market, increasing the risk of a future house price crash. Mr Archer said that the recent surge in house prices was not sustainable. "We continue to believe that affordability constraints, elevated debt levels and a softer labour market will prevent sustained marked increases in house prices over the coming months. "Furthermore, affordability will be limited over the coming months by moderate earnings growth, as well as markedly increased utility bills and a further increase in council tax."
The BBA figures released today also showed that unsecured lending – principally loans and overdrafts - increased by £600 million in January, double the £300 million average of the previous six months Yet consumers still seem wary to splash out using their plastic with credit card borrowing increasing by just £100 million - in line with the average for the last six months.
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