Strong rise in mortgage approvals

House sales seem likely to keep on rising this autumn

Mortgage approvals rose to the highest level since March 2008 in September, according to the Bank of England.

The number of mortgages approved for house purchase, but not yet lent, rose 3,000 during the month to 56,000.

Mortgage approvals are a good indicator of short term trends in the property market, and have risen this year in line with recovery in completed sales.

Non-mortgage borrowing by individuals shrank for a third month in a row - the first time since records began in 1993.

According to recent figures from HM Revenue & Customs, sales rose to 82,000 in September, double the number sold in January.

"Lending activity has recovered in recent months, when compared to the start of the year, as buyers and sellers tentatively return to the market," said Adrian Coles, of the Building Societies Association (BSA).

"However, lending is still at levels much below that of previous years, and the slight recovery remains fragile," he warned.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors said:

"A little more money is now flowing through into the mortgage market."

"However the ending of the stamp duty exemption on properties valued at £175,000 or less at the end of December could hit activity levels particularly outside of London and the south east in the early part of 2010," he said.

Up and down

While the recent pick-up in property sales seems likely to continue for the time being, other forms of personal borrowing are in decline.

Consumer credit borrowing fell by another £300m in September, after falls of £400m and £300m in August and July respectively.

Within this, credit card borrowing held up, albeit with low levels of growth.

But other forms of personal borrowing, such as bank loans, car loans and hire purchase agreements, have fallen.

Under the combined impact of the recession and the credit crunch consumers have reined in their spending while lenders have become fussier about to whom they will lend.

In fact non-credit card personal borrowing has dropped in eight out of the past nine months.

This has been the longest stretch of contracting lending since the Bank's records started in 1993.