Mortgage demand hits eight-month high

MORTGAGE demand has surged to its highest level for eight months, in the latest sign the housing market has stabilised. The British Bankers' Association said 65,635 home loans were approved in March, the highest since last July.

Mortgage lending rose by £4.6bn in March, down from £4.6bn the previous month but in line with the recent average. The Association warned, however, that market activity and prices were still well below those seen in the same period last year.

Compared to March 2004, the number of approvals last month was down by a third and 25% lower in value. The average loan for house purchase this year was £121,600. Overall approvals, including remortgaging and equity release, hit 188,105.

BBA director of statistics David Dooks said: 'March mortgage figures saw signs of a spring stimulus, but not to the same extent as last year and activity levels, on any measure, are continuing to run below those of 12 months earlier. Loans approved for house purchase saw some recovery, though it is too soon to say whether the slower housing market seen over the previous six months or so is now picking up.'

Economist Howard Archer, at City research firm Global Insight, warned home owners not to expect an upturn in the housing market. He said: 'While BBA mortgage approvals data for March are firmer for a second month running and home loan approvals are at the highest level since last July, this is largely due to the usual seasonal upturn in activity.'

He warned the 18,270 increase in house purchases is still below the average 20,216 increase seen in March over the previous five years. Furthermore, at 65,635, the number of approvals in March is still markedly below the average March figure of 85,714 for 2000-2004.

The BBA also said that subdued credit card lending has led to 'noticeably weak consumer credit' in the first quarter of 2005, in line with weaker retail sales. Net lending to individuals fell to £5bn in March from £5.5bn in February.

Loans and overdrafts rose only £386m in March, well down on the £669m in February and below the recent monthly average of £600m. Credit card debt rose to £138m from £54m in February, but was weaker than the previous six months' average, the BBA said.