Mortgage approvals up 11pc but housing market stays in doldrums

MORTGAGE approvals picked up last month but remained sluggish, amid warnings from major banks of a slowdown in the housing market.

The number of mortgage approvals rose to 38,049, up 11pc on the previous month. However, the data confirmed a continuing lacklustre trend in home buying as approvals were down 9.4pc on the previous year and represented the fifth lowest level in three years.

The UK Finance data also pointed to a continuing slowdown in consumer credit, with month-on-month growth stable at 4pc, flat on the previous month and well below a peak of 6.7pc in April last year. The data will provide further comfort to the Bank of England, which warned last year that lenders risked losing as much as £30bn from defaults on credit cards and personal loans credit if the economy took a turn for the worst.

The Bank of England’s own data pointed to a slump in credit card borrowing in March as British families appeared to turn their back on plastic, borrowing an extra £254m compared to a rise of £1.7bn the previous month.

“The housing market is struggling to gain traction amid challenging conditions and we suspect that any meaningful upturn will remain elusive over the coming months,” said Howard Archer, chief economic adviser at the EY Item Club. Mr Archer is predicting house price rises will be limited to a modest 2pc this year, before edging up by “no more than 3pc” next year.

Earlier this week, the UK’S largest building society Nationwide became the latest of a string of lenders to forecast “subdued” housing market conditions over the coming year. The mutual reported a 7pc fall in profits as mortgage lending slumped by a third, with it blaming “intense competition”.

Mr Archer said: “Consumers appear to have become more cautious in their borrowing while lenders have become warier about advancing unsecured credit.”