Slow rise in mortgage lending

Julian Harris
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MORTGAGE lending rose by £1.2bn last month, as the number of approvals edged up to 46,967, the Bank of England revealed yesterday.

The number of mortgage approvals was up 1.2 per cent compared to the previous six month average.

“The news is hardly encouraging,” responded Nida Ali of the Ernst and Young Item Club, “given that a level of around 47,000 still reflects depressed housing demand and is consistent with falling house prices.”

However, consumer credit surprised on the upside, rising by £0.8bn compared to the previous six month average of £0.2bn, and a fall of £0.3bn in January.

Meanwhile, there was a £7bn – 0.5 per cent – drop in the Bank of England’s preferred measure of the money supply (M4 excluding intermediate other financial corporations) – saw its biggest monthly drop in a year.

“This was the result of money-holders switching into foreign currency deposits, possibly in anticipation of sterling weakness,” said Henderson’s Simon Ward.

“Ignoring the foreign currency distortion, M4-ex rose by 2.2 per cent annualised in the six months to February, up from 1.6 per cent in the prior six months,” Ward argued.

“While growth remains sluggish, it is probably more than sufficient to finance trend economic expansion and two per cent inflation given a rise in the velocity of circulation,” he said.