© The Herald
Originally published: 31.03.2009

UK mortgage lending grew almost twice as fast as expected in February, and the number of mortgage approvals rose to its highest level for nearly a year, in a tentative sign the housing market may be nearing a floor.

The number of loans approved for house purchase rose to 37,937 in February from 31,791 in January, the Bank of England said yesterday, the highest since May 2008 and above forecasts for a modest increase to 34,000.

Mortgage lending rose by £1.507bn, almost double analysts' forecasts for an £800m rise, and up from just over £1bn in January.

Analysts said the figures offered a first indication that activity in the UK's sinking housing market may have passed its low point, but that prices were likely to continue to sink for months to come.

"The further limited rise in mortgage approvals, and reports from estate agents that buyer inquires have recently picked up appreciably, suggest that housing market activity has very likely bottomed out," said Howard Archer, economist at IHS Global Insight.

However, it is probably too early to call a turn in the market, especially as the number of home loan approvals are still only around a third of the level what they were in 2007.

"Approvals have a long way to go before they get to levels that are no longer consistent with falling house prices - in fact they need broadly to double," said Vicky Redwood, an economist at Capital Economics.

House prices have plunged by around 20% from the peak in 2007 as a global shortage of credit has forced banks to cut back on lending and ramp up borrowing costs, even as official interest rates have been cut sharply.

And the difficulty in getting a mortgage, combined with a rapid slowdown in the economy and soaring unemployment have made people reluctant to buy or move home, adding to the downward pressure on prices.