HOME loan approvals in the UK rose unexpectedly in March, according to the Bank of England, in a sign that the housing market may be continuing to recover.
The bank announced that mortgage approvals rose to 49,860, from 49,029 in February.
Economists had forecast a fall to 48,000, on the back of the expiry of stamp duty exemption for first-time buyers at the end of March.
However, lending figures remain downbeat, with approvals only marginally above half pre-recession levels of almost 90,000.
Figures also showed that net mortgage lending during March was £1 billion, down from £1.1bn the previous month, in line with forecasts.
Economists have said net lending has been limited both by muted market activity and homeowners taking advantage of savings from low mortgage rates to reduce their debts.
However, the Bank of England’s figures also showed that credit card borrowing rose by £200 million in March – its largest increase since last July – after a net repayment of £100m in February.
Howard Archer, chief UK and European economist with IHS Global Insight, said the positive figures did “little to discourage” the expectation that house prices would “drift downwards”.
He said: “Not only does housing market activity remain very low compared to long-term norms, but the economic fundamentals still look worrisome for the housing market, with unemployment high and likely to rise further, earnings growth muted and the outlook uncertain.
“Indeed, the housing market may well be hit by heightened consumer concern over the economic outlook following the news that the UK is officially back in recession, with GDP contracting 0.2 per cent quarter-on-quarter in the first quarter.”
Mr Archer said house prices were expected to fall by around 3 per cent by the end of this year.
Mark Hordern, chief executive of the Glasgow Solicitors Property Centre (GSPC), said: “There is a big question mark over the mortgage market as a whole.
“I think it would be fair to say that there has been a gradual improvement as a whole, year on year, in the number of mortgages being issued for the purposes of buying a house, and I think that has become more noticeable in the last three months.
“Partly that was possible because people thought the euro crisis had gone away, and now it is back with a vengeance.”
He said the eurozone crisis is making banks cautious about lending, and harder for first-time buyers to secure mortgages.
Other analysts were more upbeat, pointing to the positive Construction Purchasing Managers’ Index (PMI), which measures growth in the building sector, as further proof of a gradually improving market. The index eased to 55.8 from the previous month’s 21-month high of 56.7, still well above the 50 level which separates growth from contraction and beating forecasts for a fall to 54.0. The figures contrasted sharply with a steep slump in construction, in official statistics for the first quarter.
“These aren’t the biggest releases of the week, but they do hint at least at a degree of resilience in UK activity,” said Investec economist Philip Shaw.