UK Mortgage Approvals Hit Near Six Year High

Mortgage approvals accelerated in December to their highest level in almost six years amid stimulus under the Help to Buy scheme and an emerging recovery in the UK economy.

The Bank of England said there were 71,638 mortgage approvals in December, up from 70,820 in the previous month and the highest since January 2008. The total value of mortgage approvals lifted by a billion pounds to £12.4bn.

Help to Buy is increasing the availability and affordability of mortgage credit in the UK. The scheme's first part offers homebuyers an interest-free loan worth up to 20% of a property's value. The second part is a government guarantee for banks' mortgage lending, on offer for a small commercial fee.

In the first three months from the guarantee becoming active in October, around a billion pounds' worth of mortgage approvals were supported by Help to Buy.

A higher number of mortgage approvals is pushing up house prices as a constrained supply of housing stock in the UK comes under pressure from higher demand.

Some say there is enough slack across most of the housing market, except London and the south east of England, to cope with higher demand because many areas are yet to return to pre-financial crisis norms.

Others say a constrained supply, mortgage market stimulus, falling incomes in real terms, and a record-low interest rate at the Bank of England are fuelling a housing bubble.

House prices have been rising sharply on average across the UK. Data from Land Registry shows across 2013 the average house price in England and Wales lifted 4.4%.

They rose in all regions except for the north east of England, where they fell 0.1%. There is also disparity between the other regions.

For example in London house prices rose 11.2%, whereas in Yorkshire & The Humber they lifted 0.5%.

The UK's economic recovery will also spur on organic growth in mortgage approvals. The UK economy grew at a rate of 1.9% in 2013, the quickest since before the financial crisis in 2007.