Mortgage approvals increase in March, but remain well below historical norms – ITEM Club
Nida Ali, economic advisor to the EY ITEM Club, comments on today’s lending figures:
- The increase in mortgage approvals in March follows a steep decline in February
- The wider economy remains unsupportive and house prices are expected to continue falling over the course of 2012
- The rise in consumer credit is likely to be attributed to March’s weather-related pickup in retail sales
“The increase in mortgage approvals in March follows a steep decline in February. Looking through the monthly volatility, levels seem to be stagnant at around 50,000, which is well below historical norms. Overall, the housing market remains weak and, with the UK officially back in recession, may be hit further by a decline in confidence.
“The short-term outlook is set to remain very challenging. The latest Credit Conditions Survey pointed to a significant reduction in mortgage availability in Q2, while a number of banks have started to raise their SVRs. The wider economy is also unsupportive. Despite some signs of a stabilisation in the labour market, consumers are still under immense pressure in the face of declining real incomes and high levels of indebtedness. We expect house prices to continue falling throughout 2012, before starting to recover gradually.
“Meanwhile, the rise in consumer credit, driven by an increase in credit card lending, appears to be closely linked to the robust increase in retail sales in March. In our view, this was probably due to the unusually warm weather in March, rather than an underlying trend, and so it is unlikely to be sustained.”