U.K. Mortgage Approvals Rise For First Time In Four Months

() - Mortgage approvals in the U.K. rose in March, but net lending dropped, pointing to subdued activity in the British housing market in the beginning of this year.

Approvals increased to 48,901 from 46,882 in February, a report released by the Bank of England showed on Tuesday. That was the first increase in four months. However, it stood below the consensus forecast of 50,000 and the previous six-month average of 54,201.

“March’s mortgage approval figures from the Bank of England confirm that demand is struggling to regain the ground lost at the start of the year,” Capital Economics’ chief property economist Ed Stansfield said in a note. “We suspect that the huge gap between house prices and earnings, the still-tight credit conditions and a weak labour market will keep demand subdued for some time.” The economist noted that mortgage approvals would take another six months time to surpass their recent high recorded in November 2009.

Total net lending to individuals rose by GBP 0.6 billion in March. The annual growth rate was unchanged at 0.9%. Within the total, net lending secured on dwellings rose by GBP 318 million, the lowest since July 2009.

“Today’s lending to individuals data is indisputably weak,” said Hetal Mehta, senior economic advisor to the Ernst & Young ITEM Club. “The ‘mortgageless recovery’ is unlikely to be sustainable and there are already signs that house price inflation is slipping as supply pressures abate thanks to higher prices encouraging more people to put their properties on the market.”

Consumer credit moved up GBP 0.3 billion, above the previous six-month average of GBP 0.1 billion, but below February’s increase of GBP 0.6 billion. The expected increase for March was GBP 0.5 billion.

Mehta said the slowdown in consumer credit provides further evidence that the household sector is reluctant to re-leverage. “We expect consumers to provide little support to the recovery as it develops this year,” the economist said. “The slow turnaround in lending will constrain the economy recovery over the course of 2010 and we expect only a patchy improvement thereafter.”

Separate figures showed that M4 Money supply rose 0.2% month-on-month in March, taking the annual growth to 3.6%.

Also on Tuesday, survey data showed that the Markit/CIPS U.K. manufacturing purchasing managers’ index rose to a fifteen-and-a-half year peak of 58 in April from 57.3 in March. Economists had forecast a reading of 57.5.

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