UK mortgage approvals hit two-year high

The number of mortgages approved for house purchase reached its highest level for two years during November, figures showed today.

A total of 44,713 loans were approved for people buying a home during the month, 152% above the low point reached in November last year, according to the British Bankers' Association.

But the group cautioned that the huge year-on-year jump reflected the weakness of the market in 2008, rather than a much stronger market now, although it added that approvals were slightly higher than they were two years ago.

There was also a slight increase in net mortgage lending, which strips out redemptions and repayments, with this rising to £3.3 billion in November, its highest level since February.

But the number of loans approved for people remortgaging remained subdued, as the low base rate meant many people were better off staying on their lenders' standard variable rate when their existing deal came to an end.

There were only 22,360 remortgage loans in the pipeline during November, two-thirds lower than in the same month of 2007.

The number of people withdrawing equity from their property is also running at around half the level seen two years ago.

Meanwhile, consumers continued to focus on building up their savings and paying down unsecured debt.

Credit card spending was slightly higher during November than in October at £5.8 billion, but down on the level seen 12 months earlier.

Once repayments were taking into account, outstanding debt rose by £217 million, in line with the recent six-month average.

Demand for personal loans continued to be weak, with borrowing through loans and overdrafts contracting by £526 million - the 12th month in a row during which consumers have repaid more than they borrowed.

The British Bankers' Association (BBA) said outstanding loan debt had fallen by £3.6 billion during the year so far.

People also increased their savings levels by £1.4 billion in November, although this was down on both the previous month and the recent six-month average.

Consumers have increased their savings by more than £18 billion during the first 11 months of the year, down slightly on the £21 billion they set aside during the same period of 2008.

David Dooks, director of statistics at the BBA, said: "Household priorities are showing up in the November figures.

"Demand for new personal loans was weak and people are paying off debt or building savings in response to economic circumstances."

Oliver Gilmartin, senior economist at the Royal Institution of Chartered Surveyors, said: "Today's numbers add further weight to our view that house prices will continue to move higher during early 2010.

"Lending from mainstream banks has returned to levels last seen two years ago, although (it) remains around 30% below the levels pre-dating the credit crunch."

The group expects house prices to end next year marginally higher than they start it.