Mortgage approvals hit two-year high

Mortgage approvals hit two-year high

Mortgage approvals jumped to a two-year high in January, according to lending figures from the Bank of England.

Some 74,581 mortgages with a total value of £13.9bn were approved for house purchases in January, the highest figure seen since 76,104 approvals were recorded in January 2014.

The spike in approvals comes as consumer credit expanded at its fastest rate for a decade, growing 9.1% to match January 2006.

The Bank of England money and credit report showed the amount being borrowed by consumers rose in January by £1.56bn.

It brings the total amount of consumer credit for January to £179.5bn.

The sharp expansion in consumer credit will fuel concerns that people are relying too heavily on personal loans, credit cards and overdrafts to make ends meet.

Howard Archer, chief UK and European economist at IHS Global Insight, said the swell in mortgage approvals dovetails with the forthcoming rise in stamp duty.

Buy-to-let landlords will face a 3% hike in stamp duty from 1 April.

He added: "This could well exert upward pressure on house prices in the near term. Post April, this move may modestly dilute housing market activity and upward pressure on prices."

The UK's recovery has been driven by consumer spending, but most economists want to see an increasing amount of this spending come from rising disposable income levels, rather than a build-up of unsecured debt.

Archer added: "Bank of England governor Mark Carney has stated that UK growth is not reliant on growing debt levels among households, and it is true that household debt levels have come down from the peak levels seen in 2009. Furthermore, household wealth levels have picked up.

"Nevertheless, it is important that consumers do not become increasingly tempted to take on excessive debt and also that bank lending standards do not slip."