INSTANT VIEW 5-UK Dec mortgage approvals higher than forecast

Wed Jan 30, 2013 4:57am EST

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LONDON, Jan 30 (Reuters) - The Bank of England released the
following data for consumer credit and M4 money supply on
Wednesday (previous data in brackets):
    
  NUMBER OF MORTGAGE APPROVALS
                           DEC     NOV              FORECAST
                           55,785* 54,011 (54,036)  54,500
  LENDING TO INDIVIDUALS (NET CHANGE IN BLN STG):
                           DEC     NOV          FORECAST
  Total lending            1.7**   0.1 (-0.1)    n/f
  Secured on dwellings     1.0*** UNCH (-0.2)    0.5 
  Consumer credit          0.6     0.1  (0.1)    0.2
  - of which credit card   0.2     0.2  (0.2)    n/f
  FINAL M4 MONEY SUPPLY (PCT):
                           DEC     NOV 
  M4 mth/mth (sa)          0.7    -0.2 (-0.2)
     yr/yr                -1.0#   -2.9 (-2.8)
  M4 excluding intermediate other financial companies
     mth/mth (sa)         UNCH     0.4  (0.3)
     yr/yr                 5.2##   4.5  (4.5)
    
    * Highest number of mortgage approvals since January 2012
    ** Biggest rise in total lending since September 2012 at
1.685 billion pounds
    *** Biggest rise in lending secured on dwellings since April
2012 at 1.036 billion pounds
    # Smallest annual percentage fall in aggregate M4 since
August 2011
    ## Biggest annual percentage rise in M4 excluding
intermediate other financial companies since Q2 2008
    
    ECONOMISTS' VIEWS
    
    ROB WOOD, BERENBERG BANK
    "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."
    
    HOWARD ARCHER, IHS GLOBAL INSIGHT
    "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."
    
    BRIAN HILLIARD, SOCIETE GENERALE
    "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. 

    ROSS WALKER, RBS
    "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."
    
    PETER DIXON, COMMERZBANK
    "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." 

    PHILIP SHAW, INVESTEC 
    "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."
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