Just when you think you have the pulse of the markets they hit back at you. This is exactly what has happened on the home loan front in the UK. New mortgage approvals rose to a seven-month high in March, coming as a sweet summer shower to Blair and co, just days before the May 5 election; at least on paper.
The Bank of England (BoE) confirmed that unsecured borrowing rose sharply. This is in contrast to the gloom and doom that was being predicted. However, although mortgage approvals have risen buyers are still offering well below what most sellers are asking. The mortgages in many cases are 'in place' with buyers shopping arounde for a value property before they purchase. Buyers simply believe that sellers are asking unrealistic prices, especially in light of the expected interested rate increases which are likely to come post election.
Ed Stansfield of Capital Economics, says, "Mortgage approvals ... add to the impression that after last year's sharp decline in confidence, the market may be stabilizing." The Bank Of England appeared to back him with their figures, which showed that mortgage approvals rose to 91,000 last month from 86,000 in February. This is easily the highest since last August. This is not to say that the market is bullish, "Other recent surveys also suggest that conditions in the market remain very difficult and suggest that the latest upturn in approvals may not persist for more than a few months," Stansfield cautions.
Ross Walker, an economist at the Royal Bank of Scotland, agrees. "Taken together, the data suggests a degree of stabilization in consumer borrowing and the housing market." she says. She added that the picture was not all rosy and would take some time to get back to the boom time, though outward signs show a degree of stabilisation.
Gavin Redknap, an economist at Standard Chartered Bank, said, "The BoE should take heart from the mounting evidence that the housing market has achieved a soft landing." He elaborated that a rate hike in May looked unlikely but with growth becoming more balanced and inflation edging up, there could be some change in interest rates this summer. But it is widely expected that the rates will be steady at 4.75% for the ninth month running when monetary policy committee meets in a week's time.
Posted
on : Mon, 02 May 2005 17:45 GMT | Mortgages News
By : Mike Lawson
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