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Mortgage approval figures rebound
Last updated at 16:22pm on 29.06.07
Mortgage approvals have risen after a recent slump
Mortgage approvals have risen after a recent slump, confirming fears that interest rates will rise even further.
The Bank of England said 114,000 loans were agreed for home purchase during May, up from 109,000 in April.
It reverses a three-month falling trend and will add to pressure on policymakers to raise interest rates further in a bid to cool activity.
Economists are now predicting that the base rates could top 6 per cent within a few months, with the resulting slowdown being quicker and sharper as a result.
Data for May showed that approved loans for house purchase and remortgaging were both up on the previous month.
A total of 300,000 mortgages for all purposes were agreed by lenders, up from 278,000 in April, figures showed.
Although the approval figures were up, the increase in net mortgage lending fell month-on-month, from £8.8 billion to £8.7 billion.
This is due to a lag in the mortgage buying process and reflects weaker demand in previous months.
Vicky Redwood, UK economist at Capital Economics, said: "Essentially, this confirms that the Bank of England's Monetary Policy Committee will have to raise rates at least once more, we think twice or maybe more, to cool the economy including the housing market.
"The more resilient the housing market is in the short term, the sharper and bigger the adjustment might be later this year."
Howard Archer, chief UK and European economist at Global Insight, said despite stronger approval figures there are signs that the housing market is coming off the boil.
He said: "The overall trend still appears to be weaker in recent months as higher interest rates, elevated house prices and modest real disposable income growth increasingly squeeze new buyers out of the market and make it more difficult for existing house owners to trade up.
"We expect this slowdown in activity to continue over the coming months as affordability pressures are poised to rise further still."
Total net lending to individuals in May increased, recorded at £9.5 billion in May compared with £9.2 billion in the previous month.
Bank of England figures showed this was the result of an rise in unsecured loans and advances.
But consumer appetite for spending on plastic remained subdued on May.
Credit card lending fell by £0.2 billion, weaker than the £0.1 billion increase in April. end
