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Mortgage approvals at 18-month high

Wednesday, 1 February 2006 12:00 AM

Mortgage approvals are at their highest level for more than 18 months, according to official figures.

Bank of England data shows that 122,000 loans for house purchase were approved in December 2005 - 6,000 more than November and the highest since May 2004.

Data from estate agents and mortgage lenders had already shown that December, typically a quiet month for the housing market, was unseasonably busy.

And the housing market's strong end to 2005 has carried into the new year, with Nationwide recording a 1.4 per cent increase in house prices during January.

David Stubbs, economist for the Royal Institution of Chartered Surveyors (RICS), said: "The high level of interest in the market is evident not only through these mortgage approvals, but in the number of would-be buyers making enquiries as captured in the RICS housing market survey, which rose for the seventh consecutive month in December."

But with buyer enquires slowing in recent months, he does not expect this resurgence to continue.

"The boost from August's interest rate cut will begin to wear off and this, together with the weaker labour market performance of recent months, makes further increases in activity levels unlikely," he added.

RICS nevertheless expect mortgage approvals to hit 1.33 million in 2006, compared to 1.2 million in 2005 - although this is still below 2002's high of 1.42 million.

The Council of Mortgage Lenders said gross mortgage lending in December was the highest on record.

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