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• Mortgage approvals at highest level since May 2008
• Figure is still 44% lower than 12 months ago
The number of mortgages approved for house purchase jumped by 19% during February in a sign that buyers are returning to the market, figures showed today.
A total of 37,937 loans were approved for people buying a home during the month, the highest level since last May, according to the Bank of England.
The figure suggests falling interest rates and double-digit house price falls are tempting buyers back to the property market. Since the beginning of the year, estate agents have been reporting an increase in interest in property, but there had previously been little evidence to show this was translating into sales.
The British Bankers' Association last week released figures showing the number of mortgages approved for house purchase by the major banks rose for the third month in a row during February, but this was thought to reflect an increase in their market share.
However, today's Bank of England figures, which are above the recent six-month average of 31,495, suggest sales may be picking up again. Vicky Redwood, UK economist at Capital Economics, said: "February's household borrowing figures suggest that housing market activity may finally have turned a corner.
"The rise in the number of mortgage approvals for new house purchase ... might suggest that the pick-up in new buyer inquiries is feeding through into actual activity. With new buyer inquiries still rising, this is clearly quite promising."
However, despite the pick-up, approvals for house purchase were still 44% lower than in February 2008.
Remortgaging activity also continued to decline during the month, with just 32,633 loans approved for people switching to a better deal – well down on the previous six-month average of 52,780.
The fall in remortgaging activity is likely to reflect the fact that record low interest rates mean many people are better off staying on their lender's standard variable rate when their existing deal comes to an end, rather than switching to a new mortgage.
Net mortgage lending, which strips out redemptions and repayments, also rose during February, increasing to £1.51bn from £1.08bn in January, but still below December's £1.96bn.
Unsecured borrowing falls
Levels of unsecured borrowing fell, meanwhile, as consumers repaid loans and overdrafts rather than taking on new spending.
A total of £245m was repaid by borrowers, more than offsetting the £165m rise in consumer credit recorded in January. Borrowing on credit cards rose by £190m, but £435m of other unsecured lending was repaid.
Separate figures from the Building Societies Association showed an increase in the amount of money flowing into savings accounts during the month, with societies seeing their busiest February on record. Net receipts were up 18% on last year's figure at £1.6bn. Some of this money has been transferred from banks, which last week reported net outflows during the month.
The move may reflect a belief that building societies offer a safer haven for cash deposits than banks, although this weekend's collapse of the Dunfermline Building Society may persuade some savers that this is not necessarily the case.
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