Mortgage approvals hit 10-month high

FURTHER evidence that the housing market has stabilised emerged today after the number of loans for house purchases hit their highest level in 10 months.

Figures from the British Bankers Association showed 67,702 house purchase loans were approved during May, the highest number since July last year.

Although the figures suggest the fall in mortgage levels has been arrested, activity is still well below historical levels. The increase of just 412 between April and May compared to the average jump between the two months of 6,699 over the previous five years.

The association added that total mortgage lending during the month rose by £4.3bn, up £300m on April but down from the £4.89bn recorded in the same period last year.

Elsewhere, net credit card debt rose by £117m after April's shock fall of £40m ? the first time in a decade that Britons had paid off more than they borrowed on their cards. While this figure was slightly higher than the six-month average, the BBA said consumers were beginning to make large repayments on their cards.

Director of statistics, David Dooks, said: 'Levels of loan approvals fluctuate with seasonal patterns, but the volumes we are seeing suggest that a fairly stable lending picture will continue in the near term. Credit card lending continued to be weak, reflecting the subdued retail sales environment.'

Howard Archer, chief UK economist with City research firm Global Insight said the housing market is struggling to build on the very limited spring selling season.

He said: 'We maintain our belief that the housing market is more likely to see an extended period of relatively subdued activity and soft prices rather than undergo a sharp correction. However, much will clearly depend on how well the economy and employment holds up over the coming months, and we acknowledge that a sharp correction certainly cannot be ruled out.'

In a seperate survey by Abbey, a third of potential first-time buyers said they wanted to but in the next 12 months, but only 5% are confident of being able to afford it.