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UK mortgage approvals soar but property professionals cautious about recovery

There is little doubt that the statistics show that property buyers are at last beginning to find it easier to secure financing for mortgages. The Bank of England said that approvals for home loans increased to 37,937 in February, up 31,791 in January and more than the average over six months which was 31,495.

However, consumers who are worried about the economy's outlook and the threat of job losses or wage cuts made the largest net repayment of loans since the records began in 1993.

The Royal Institution of Chartered Surveyors said that the increase is a reflection of improved affordability which has been fueled by a 20% fall in the price of homes and lower borrowing costs.

But it warned that accessibility to the property market is still an issue because first-time home buyers are still finding it hard to find the deposits that are required by lenders.

'Further evidence that the pick-up in buyer interest in the housing market is feeding through into actual activity is evident in the latest mortgage approvals data from the Bank of England. The number of mortgages sanctioned in February climbed to the best level since May 2008. This reflects in no small measure the improvement in affordability in the wake of the 20% drop in house prices and the sharp reduction in borrowing costs,' said Simon Rubinsohn, RICS chief economist.

But he added; 'Even so, accessibility to the market still remains a problem with many first time buyers struggling to find the necessary deposit to compensate for the much reduced loan to value ratios now being offered by lenders.

'While it is likely that the numbers of mortgages being approved will continue to edge upwards over the coming months, the level of activity will still remain low by historical standards. The fact that transactions have bounced off the bottom hasn't reduced the need for the government to take further steps to enhance the flow of mortgage finance.'

And the Council of Mortgage Lenders said it would want to see what happens in the next few months before taking the figures as the first signs of a recovery. 'February's approvals for house purchase were nearly a fifth higher than in January and marked the first material improvement in approvals since mid-2008,' said CML economist Paul Samter.

'This is welcome news, but we will need to see a few more months' figures before we can say with any confidence that market conditions are showing a fundamental improvement. Transactions remain historically very weak, and this makes it harder than usual to adjust the figures for the normal upturn that happens in the spring,' he added.