Mortgage approvals hit two-year high as debt is blitzed

MORTGAGE approvals rose to a two-year high in December, official figures showed, as borrowers continued to shrink their debts, repaying £400 million in personal loans.

The Bank of England statistics revealed the largest repayment of personal loans since records began in 1993, as analysts said heightened concerns about the wider economy and jobs were making consumers lose their appetite for borrowing.

Credit card borrowing was also flat for the third month in a row, according to the latest Bank of England figures, despite the Christmas season.

Figures from the Buildings Societies Association (BSA) said that consumers took out £100m of savings in December, indicating they could have been using spare cash to help tide them over Christmas rather than taking on more debt.

Overall, the BSA said savings balances held by mutuals grew by £4 billion last year, compared with a £200m increase in 2010. BSA director-general Adrian Coles said: “It is clear that savers are still struggling to save as much as they would like, or are choosing to use spare cash to pay down debt instead.”

Despite the strong mortgage figures, experts warned that the housing market remains weak compared with long-term norms, and is likely to come under further pressure from unemployment and low confidence.

The number of loan approvals for house purchases rose to 52,939 in December, the highest figure since December 2009 and an increase of just over 300 on November.

Howard Archer, chief UK economist at IHS Global Capital, added: “Despite the rise in mortgage approvals to a 24-month high in December, the fact remains that housing market remains very low compared to long-term norms.”

The value of the mortgage approvals stood at £7.5bn, unchanged from last month’s figure.