Housing market 'picking up'

A total of 37,937 loans were approved for people buying a home during the month, 19% more than in January and the highest level since May last year, according to the Bank of England.

The unexpected increase, which beat analysts' expectations, suggests reports from estate agents of a surge of interest in property from potential buyers is beginning to translate into sales.

It prompted economists to say activity in the housing market may now have bottomed out, although they cautioned that a recovery was still likely to be some way off, particularly as unemployment rises.

In a further sign of the current economic uncertainty, consumers repaid a record amount of debt during the month.

The level of outstanding unsecured debt on credit cards, loans and overdrafts fell by £245 million in February, only the second monthly decline since records began in 1993.

But in a further sign of the pick up in activity in the mortgage market, the Bank of England also reported a rise in net mortgage lending, which strips out redemptions and repayments, to £1.51 billion, up from £1.08 billion in January.

The jump in mortgage activity is in line with figures released by the British Bankers' Association last week showing the number of mortgages approved by the major banks for people buying a home rose for the third month in a row during February.

Vicky Redwood, UK economist at Capital Economics, said: "The rise in the number of mortgage approvals for new house purchase... might suggest that the pick-up in new buyer enquiries is feeding through into actual activity. With new buyer enquiries still rising, this is clearly quite promising."

But she added that approval levels would need to broadly double before they were no longer consistent with falling house prices. Despite the pick-up, approvals for house purchase were still 44% lower than in February 2008.