Mortgage approvals jump in post-election boost for housing market

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Banks approved the highest number of mortgages in more than four years last month, offering further evidence of a post-election boost in the housing market.

Approvals for house purchases rose to 46,815 in December, up by 2.8 per cent on November and the highest monthly figure since August 2015, according to UK Finance, which represents banks.

Its report is the latest to suggest that the market is recovering from its lull. According to Rightmove, the property portal, house prices have risen by 2.3 per cent since the general election on December 12, the largest monthly rise for the period since its surveys began in 2002. Forecasters at EY, the professional services group, have raised their house price growth forecasts for 2020 from 2 per cent to 2.8 per cent.

Howard Archer, chief economic adviser to the EY Item Club, the forecasting group, said: “Mortgage approvals were highly likely boosted by increased confidence and reduced uncertainties after the decisive general election result.”

However, Gabriella Dickens, at Capital Economics, a consultancy, cautioned against reading too much into the latest figures.

While UK Finance suggested that there had been a sharp rise in mortgage approvals, data from the Bank of England pointed to a much more modest price increase of 1.4 per cent year-on-year in November.

“Already very high house prices and rock-bottom mortgage interest rates will keep a lid on any gains,” Ms Dickens said. “Indeed, we expect house purchase mortgage approvals and transactions to rise by only between 1.5 per cent and 3 per cent over the next two years.

“With Brexit-related uncertainty set to intensify later this year and with the housing fundamentals unsupportive, we don’t expect any meaningful rise in mortgage lending any time soon.”

The latest figures will not have escaped the attention of the Bank of England, whose monetary policy committee meets this week to make its latest decision on interest rates.

Although most surveys indicate that consumers are feeling more confident, the UK Finance report suggests that households are still cautious about their finances. The annual rate of consumer credit rose by 4 per cent in December, the joint weakest pace since April last year. Credit card lending alone was up by 2.4 per cent, its second weakest performance since late 2014.