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UK mortgage approvals climb to 18-month high

LONDON: UK 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 on Oct 29 in London. The median of 20 forecasts in a Bloomberg News survey was 53,600. By value, mortgage lending increased by £922 million (RM5.2 billion).

Bank of England policy makers will decide next week whether to expand their £175 billion programme 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.

“Life is clearly returning to the housing market and credit conditions are improving as well,” said James Knightley, an economist at ING Financial Markets in London. “It will be a very tight decision for the Bank of England. The fact that gross domestic product is still negative will make it pretty difficult for them to do anything other than expand quantitative easing.”

The pound stayed higher against the dollar after the report and was trading at US$1.6430 as of 9.40am in London on Oct 29.

Recent reports show house prices are recovering after falling as much as a fifth from their peak in 2007. Land Registry figures published on Oct 28 showed home prices in England and Wales have risen almost 4% since April.

Former central bank policy maker David Blanchflower said on Oct 26 that house prices may fall next year, leaving as many as three million people 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.

Economists are divided over whether the Monetary Policy Committee should expand its money-printing programme after the economy shrank 0.4% between July and September. The slump extended the recession to six quarters, the longest since records began in 1955.

Figures published on Oct 29 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 quantitative easing fell 0.9% in September from August and was down an annualized 1.7% in the third quarter. The gauge excludes financial companies that specialise 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% on the year, the central bank said on Oct 29.

Britons cut their unsecured debts for a third month in September, with consumer credit falling £262 million, the Bank of England said. – Bloomberg LP

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