Mortgage approvals still sluggish, figures show
The number of mortgages approved for home buyers rose slightly in March, the Bank of England has said.
The total increased to 48,901 in March from 46,882 the month before, and the figure was 17% higher than in March 2009.
However, the Bank's figures still suggest that mortgage lending has had a sluggish start to the year.
Approvals in the first three months were the lowest on record for the first quarter of any year, apart from 2009.
"The Bank of England mortgage approvals data do little to dilute the belief that the housing market is finding it difficult to regain momentum after flagging at the start of 2010," said Howard Archer, economist at IHS Global Insight.
"We expect house prices to be erratic over the coming months and they may very well be no better than flat over the rest of the year," he added.
Meanwhile building societies experienced another outflow of savers' money, with a net £318m being removed in March.
It was the 12th time in the past 13 months that savers have taken out more money than they have put in from their accounts with building societies.
Despite this, Adrian Coles of the Building Societies Association was optimistic.
"The mutual sector continues to offer some of the most consistently competitive savings rates, but people may instead consider making additional mortgage payments or using savings to support their incomes in this challenging economic climate, or they may be looking to invest in the equity markets," he said.
"The mortgage market will remain fragile as there is uncertainty in relation to employment, interest rates, house price inflation, mortgage availability and, conceivably even after the election, the political outlook."
A key factor still restraining mortgage lending has been the continued level of mortgage rationing due to the credit crunch and the banking crisis.
Despite the recent revival in profitability of the UK banking system, lenders are still demanding deposits from borrowers averaging 25% of the value of the homes being purchased.
And mortgage lenders have continued to warn that from 2011 onwards banks will have to repay the government the £300bn it provided in emergency loans during 2008.
This suggests that mortgage rationing will continue for several years, though the availability of funds has been thawing slightly in recent months, according to the financial information service Moneyfacts.
Moneyfacts said that the number of mortgage deals available at the start of May was up by 12% from a month ago to 1,928, which was also 36% more than at the start of the year.
There are still very few deals requiring just a 0% or 5% deposit, but the number asking for a 10% or 15% downpayment went up from 461 to 520.
As a proportion of the market they accounted for 27% of all deals on offer - the same as a month ago - while the proportion of deals asking for at least a 25% deposit was also steady, remaining at 57% of all mortgages.
"It is good news for borrows that lenders are slowly acclimatising to a new landscape of the mortgage market and continue to improve on the competitiveness of new mortgage deals," said Darren Cook of Moneyfacts.
"But lending figures show that there is only a slight improvement in the market; we still have a way to go before the market returns to any sort of normality," he added.