There was a guarded cheerfulness in the housing market this week brought about by a modest rise in mortgage approvals by the major banks for the third month in a row. 

The British Bankers’ Association (BBA) said that there were 28,179 mortgages approved for house purchases in February, up from 24,278 in January. But the figure was still 31% lower than a year earlier.  

The figures come as cheaper mortgage repayments have also pushed down one measure of UK inflation.  

The BBA said that the greater market share of mortgage lending by the major banks was a key reason for the growing approvals figure.  

Most new mortgage lending is now done by the High Street banks, but demand is, of course, being moderated by the impacts of the recession.  

The figures show that gross mortgage lending by the major banks rose to £3.9bn in February, up from £3.4bn in January and a 9.8% annual rise.  

Mortgage repayments have become much cheaper for many as interest rates have fallen with the Bank of England bank rate currently standing at 0.5%.  

“The increase in buyer enquiries… is now feeding through into actual transactions,” said the chief economist at the Royal Institution of Chartered Surveyors (Rics).  

BBA figures demonstrate that mortgage approvals have risen for three consecutive months. Even so, the actual level of activity still remains not that far away from historic lows and it would be premature to conclude that some semblance of order has returned to the housing market.  The BBA figures also reveal the effect of low interest rates on savers, who have seen returns on their funds dip. The figures show that consumers have responded by withdrawing savings from the major banks.  

Personal deposits fell by £100m in January, the second successive monthly fall. Credit card lending rose by £0.1bn, but the annual growth rate fell to 8%. There has been a fall over the last year in the amount owed on personal loans and overdrafts as consumers pulled in their borrowing during the credit crunch.  

These figures and the cheer they have provoked remind me of the famous Churchill quotation. ‘This is not the end; it is not even the beginning of the end. But it may be the end of the beginning.’

It seems like a long time since this blog carried some decent stats, so here goes.  

The Council of Mortgage Lenders (CML) monthly report shows that the slump in mortgage lending continued in February, with gross lending down by 60% on February last year. 

Lending, at £9.9bn, was 15% lower than in January, and was the lowest figure for any month since February 2001.  

The CML said its members’ ability to lend was drying up because too many savers were choosing to put their money in National Savings policies.  

In the most sobering statistic, mortgage rationing has led to house sales falling by more than half.  

The CML’s director general said, “Retail savings are now the predominant source of funding for mortgages. But banks and building societies have seen savings ebb away to National Savings & Investments, which has a negative impact on their ability to lend.  

“Until funding improves, the capacity of lenders to lend will remain constrained,” he warned.  

National Savings & Investments (NS&I) has already raised an extra £10bn in just the first nine months of the current financial year, far ahead of its original forecast of an extra £4bn for the whole of the year.  

Of that, £6bn came in during the last three months of 2008 as the collapse of the Bradford & Bingley and Icelandic banks pushed savers into looking for a completely safe home for their money.  

However, the cost for those savers has been lower interest rates on their accounts. NS&I has brought down its savings rates in line with the fall in the Bank of England’s bank rate.  

This week NS&I announced that the payout rate on Premium Bonds would be cut from 1.8% to 1%, with one of the two £1m jackpot prizes being cancelled.  

With the economy in its current state and government borrowing still skyrocketing there seems little chance that savings will return soon. Consequently mortgages will remain hard to come by the housing market stagnant for some time yet.