U.K. Mortgage Approvals Fall For Second Month In January: BoE

Mortgages approved in the U.K. fell for the second month in a row in January to an eight month low, a report from the Bank of England showed Monday.

The number of loan approved for house purchase decreased more than expected to 48,198 from 58,223 in December. The January's figure also stood below the previous six-month average of 55,924 and the consensus forecast of 50,000.

According to Capital Economics' economist Ed Stansfield, if the economy grows by just 1% this year, it is hard to see a strong recovery in housing market activity in the near future. Mortgage approvals are likely to remain well below their pre-credit crunch levels throughout 2010, the economist said.

Last week, external Monetary Policy Committee member Kate Barker said in a Treasury Committee hearing that she was rather surprised by the strength of housing prices last year. It is possible that some people delayed decisions to move or put houses on the market. She expects the housing market to be quite weak in 2010. Barker forecasts more adjustments in the housing market with decrease in mortgage lending.

Total net lending to individuals rose by GBP 2 billion in January. Within the total, net lending secured on dwellings increased GBP 1.5 billion, larger than the GBP 1.2 billion growth in December. Economists were expecting only GBP 0.9 billion increase. The twelve-month growth rate ticked up to 1% from 0.9% in December.

Consumer credit increased GBP 0.5 billion, while economists were expecting a fall of GBP 0.1 billion. On a yearly basis, consumer credit dropped at a pace of 0.2% compared to a 0.4% drop in December. Credit card lending rose GBP 0.2 billion and other loans and advances increased GBP 0.3 billion.

Earlier in the day, a report from housing research group Hometrack showed that the average asking price for a home increased 0.3% month-on-month in February to GBP 157,600. Prices rose 0.4% from a year earlier - the first annual increase since March 2008. These figures contrast with Nationwide's, which showed a 1% month-on-month fall in property prices, with the icy winter weather largely to be blamed.

Elsewhere, a report published by the Building Societies Association showed that the value of approvals by building societies and mutually owned banks in January was GBP 0.8 billion, and gross lending was GBP 1 billion. "Low activity in the month was expected following the surge of buyers aiming to beat the end of the stamp duty relief in December," said Adrian Coles, BSA Director-General. The adverse weather conditions at the start of the year also suppressed market activity.

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