LONDON (Reuters) - The Bank of England released the following data for consumer credit and M4 money supply on Wednesday
”The UK mortgage market is gradually thawing and should continue to do so, in part because of the BoE’s Funding for Lending Scheme. We continue to think that the scheme will give a small boost to GDP growth in the second half of the year.
”Mortgage approvals rose to 55.8k in December, beating consensus expectations. The BoE Funding for Lending scheme has had a disappointing impact on corporate credit availability, but it has shown signs of success in the mortgage market. Along with easing tensions in the euro zone lowering banks funding costs, it appears to be boosting mortgage availability.
”Mortgage availability improved in the fourth quarter of last year and bank’s expected availability to improve in the first quarter as well, according to the BoE Credit Conditions Survey. The latest RICS housing market survey showed increasing buyer interest and an improved price outlook. So the gradual housing market thaw should continue as we move from winter to summer.
“Now that mortgage credit appears to be heading in the right direction, it is worth taking stock and remembering there is still a long way to go. Mortgage approvals remain about half their level in the 5 years prior to the crisis. Households are moving house roughly once every 15 years on average. We should see further improvements in coming months, but with the economy stagnant it may be some time before the UK gets back to more normal levels of housing market activity.”
”Housing market activity continues to rise gradually from the lows seen around the middle of 2012, seemingly helped by the Funding for Lending Scheme leading to more mortgages being available. Even so, a marked upturn in housing market activity currently remains elusive and it is likely to stay so for some time to come given ongoing challenging economic conditions.
”The Bank of England reported that mortgage approvals for house purchases rose for a fifth month running to be at an 11-month high of 55,785 in December. This was up from 54,011 in November, 53,040 in October and a low of 47.054 in July. It was also above the average monthly level of 51,133 seen during 2012.
”Even so, mortgage approvals remain low compared to long-term norms at 55,785 in December. Specifically, mortgage approvals have averaged 85,648 a month since 1993, while a level of 70,000-80,000 has in the past been considered consistent with stable house prices.
“However, some support for house prices should come from recent decent employment growth and likely extended low interest rates, while mortgages appear to be becoming increasingly available helped by the ”Funding for Lending“ scheme launched last August by the Bank of England.”
”There’s a modest improvement in mortgage approvals, above market expectations but still a very small increase given the hopes and expectations of the Monetary Policy Committee on the Funding for Lending Scheme.
”I tend to focus more on the M4 data at this time and there what we’re seeing is a bit of a moderation in money growth, which is disappointing but not grave, and some improvement in the lending side which I think the MPC will be focussing on far more.
”If you look at the detail of that you find that lending to households edged up, lending to non-financial companies was stable, so the improvement was in lending to non-intermediate, other financial corporations, which is less than wonderful.
”We’d hoped to see the FLS cause a material improvement in household lending and non-financial corporations.
”A little bit stronger than had been forecast and stronger than the British Bankers’ Association’s forecast.
”It’s still an incremental recovery, but at least over the last four or five months you can see a clearer uptrend in the number of mortgage approvals.
”It’s not a game-changer, it’s not radically transforming the landscape. For the Monetary Policy Committee and the Bank of England, they are clearly under some pressure to be able to demonstrate that the Funding for Lending Scheme is working.
“In terms of the number of approvals, we are still running at roughly half the levels we had pre-crisis, so this is still a fragile market, but at least you’ve got some signs of recovery.”
”My initial reaction was one of pleasant surprise, those figures obviously overshot expectations. On the face of it, those figures would support the Bank of England’s claims that the Funding for Lending Scheme is starting to make its presence felt on the credit numbers.
”But these numbers are erratic from month to month. We would need to see a few more months of good data before we can validate the claim, but at least we’re moving in the right direction. “I would feel a lot more confident that the Funding for Lending Scheme is doing what it’s designed to be doing.”
“Amid a substantial raft of gloomy data, the housing market figures seem to be standing out. Most notably the further increase in mortgage approvals to house purchase suggests that housing market activity is on an upward trend, albeit gradually and from very low levels.”
Reporting by Kate Holton, Peter Griffiths and Lorraine Turner