Proactive Investors - Improving Bank of England lending and credit data may strengthen the central bank's feeling that the UK's recession is already over, though actions by lenders in recent weeks have muddied the picture.
Data from Zoopla also out today suggested residential housing demand this month rose 11% year-on-year, while the number of sales agreed has increased 15% across the UK.
With both buyers and sellers attracted back into the property market in February, it forecast a 10% boost in the number of home sales for the year.
The BoE figures showed net mortgage approvals for house purchases rose to 55,200 in January from 51,500 in December, while net remortgage approvals remained pretty much unmoved at 30,900 and individuals repaid a net £1.1 billion of mortgage debt on top of £0.9 billion in December.
The ‘effective’ interest rate, meaning the actual interest paid by homeowners, on newly drawn mortgages fell by 9 basis points, to 5.19% in January. The rate on the outstanding stock of mortgages increased by 5 basis points, from 3.36% in December to 3.41% in January.
Net consumer credit borrowing rose to £1.9 billion in January, from £1.3 billion in December, mainly driven by higher borrowing through credit cards, with other forms of consumer credit such as car finance and personal loans increasing slightly to £1 billion from £0.9 billion.
Household cash deposits in bank accounts rose £6.8 billion – up for the second month in a row and the largest monthly increase since September 2022.
Total liquid assets held by households, including deposits with banks, building societies and in National Savings and Investment accounts, increased £6 billion, the same as in December, but above the £4.8 billion average increase in the two years prior to the pandemic.
Consumer expected to spend more this year
"Households have started this year better than they ended 2023, with reviving consumer credit flows supporting January’s rebound in retail sales," said economist Samuel Tombs at Pantheon Macroeconomics. "That said, consumers continue to manage their finances cautiously."
With mortgage repayments continuing to exceed lending, he noted that households continue to trim their other borrowing.
"The outlook for consumers, however, continues to brighten," he said, adding that the jump in the number of mortgage approvals for house purchases leading to an increase in borrowing flows in two-to-three months when those people move house.
"More broadly, we think households will be willing to spend more this year."
Ashley Webb at Capital Economics said the increase in consumer credit was stronger than expected, probably reflecting recent volatility in retail sales rather than an improvement in underlying demand for unsecured borrowing.
He said: "Overall, real GDP may still contract in Q1 but the signs of life in the housing market suggest that the 'recession' will be over soon, if it’s not already."
Alice Haine, analyst at Bestinvest, noted that the rise in UK mortgage approvals – an indicator of future borrowing – was the fourth consecutive month.
"While borrowing costs remain high, with interest rates still on pause at a 16-year peak of 5.25%, signs of a slightly improving outlook for borrowers can be found in the effective rate on newly drawn mortgages, which dropped for the second consecutive month, falling 9 basis points to 5.19%," she said.
But Emma Cox, managing director of real estate at lender Shawbrook, noted mortgage rates "are beginning to creep back up and cuts to interest rates may not materialise as soon as previously predicted".
This week, Nationwide, Britain’s largest building society, was the latest to raise its mortgage rates, following a double move from Coventry Building Society.