Mortgage lending hits mid-2008 high in January

Money and credit continued to flow through the UK economy at a healthy pace at the start of the year, with mortgage approvals and lending both running at multi-year highs.

Money supply in the UK as measures by the M4 monetary aggregate excluding intermediate other financial corporation grew by 0.6% month-on-month to £1.8trn, according to the Office for National Statistics.

Versus a year ago the rate of growth of money supply increased to 3.8%.

Total lending to individuals rose by 0.4% month-on-month or £5.3bn to reach £1.46trn, or by 3.5% year-on-year.

Net lending secured on dwellings increased by £3.7bn to hit £1.281trn, in-line with economists´ forecasts.

Mortgage approvals increased by 74,581 in January - to a two-year high - hitting £13.9bn in value and outpacing forecasts for a rise of 73,700.

Buy-to-let invetors were seen trying to front-run the expected hike in Stamp Duty in April.

Somewhat ironically, while that was seen as possibly exerting upward pressure on home prices, the upcoming referendum on continued EU membership was seen by some economists as a potential major downside risk to activity levels in the housing market.

"A vote for Brexit would be liable to see a marked hit to UK economic activity over the rest of this year and in 2017 amid heightened uncertainties, which would likely weigh down heavily on the housing market ," Dr. Howard Archer, chief UK+European economist at IHS Global Insight said in a research note sent to clients.

Dr. Archer´s forecast was for house prices to rise by 6-7% in 2016, fuelled by healthy buyer interest and markedly increased expectations for no interest rate rises this year.

Those factors would however be constrained by more stretched house prices to earnings ratios, which was at 5.69 in January according to the latest data from Halifax.

Gross mortgage lending grew by £21.3bn in January, the most since mid-2008, Dr.Archer pointed out.

Consumer credit was up by 0.9% month-on-month or £1.6bn (consensus: £1.4bn) to reach £179.5bn.

Private non-financial corporations raised £3.8bn in fresh financing from capital markets, mostly via loans from lenders (£1.8bn) and through the issuance of commercial paper (£1.1bn).