By Jennifer Ryan
Oct. 29 (Bloomberg) -- U.K. mortgage approvals climbed to their highest level for 18 months in September, adding to signs the housing market is recovering from a rout.
Lenders granted 56,215 home loans, compared with 52,970 in August, the Bank of England said today in London. The median of 20 forecasts in a Bloomberg News survey was 53,600. By value, mortgage lending increased by 922 million pounds.
Bank of England policy makers will decide next week whether to expand their 175 billion-pound ($286 billion) program of buying bonds to fight the recession. The economy unexpectedly shrank in the third quarter, and some economists say the housing-market revival may fizzle out as job losses mount.
``The mortgage market is dragging itself off the bottom but it's not particularly strong or dynamic,'' said Peter Dixon, an economist at Commerzbank AG in London. ``The bank will probably take the path of least resistance and raise the asset purchase ceiling by 50 billion pounds.''
Recent reports show house prices are recovering after falling as much as a fifth from their peak in 2007. Land Registry figures published yesterday showed prices have risen almost 4 percent since April.
Former central bank policy maker David Blanchflower said Oct. 26 that house prices may fall next year, leaving as many as 3 million with homes worth less than the mortgages used to buy them. Monthly mortgages approvals are still only half what they were in September 2007 when the credit crisis began.
Divided Opinion
Economists are divided over whether the Monetary Policy Committee should expand its money-printing program after the economy shrank 0.4 percent between July and September. The slump extended the recession to six quarters, the longest since records began in 1955.
Figures published today suggest the central bank's efforts to boost the money supply are struggling to work.
The measure of M4 that the bank uses to assess the effectiveness of so-called quantitative easing fell 0.9 percent in September from August and was down an annualized 1.7 percent in the third quarter. The gauge excludes financial companies that specialize in intermediating between banks, such as bank holding companies and non-bank credit grantors.
The main gauge of M4, the broadest measure of money supply, rose 0.8 last month and gained 11.6 percent on the year, the central bank said today.
Britons cut their unsecured debts for a third month in September, with consumer credit falling 262 million pounds, the Bank of England said.
To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net
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