Mortgage approvals reach two year high in January

Mortgage approvals reached their highest level for two years in January, according to latest figures form the Bank of England.

The Bank of England said that the number of approvals exceeded expectations reaching 58,728 in January compared to 55,019 in the previous month, and a 30% improvement on figures for January 2010.

While the 7% rise in mortgages approved but not yet lent may signal the beginning of a recovery for the sluggish UK housing market, numbers still lag behind the 2008 figures of around 90,000 approvals per month.

Earlier this week the Land Registry also reported an increase in house prices by 1.1% for the month of January.

A rush to take advantage of the end of the stamp duty holiday for first time buyers may be partly responsible for an increasing demand for property and a rise in approvals, according to some analysts. However, the full recovery of the housing market may still be a long way off. Howard Archer, of IHS Global Insight explained:

"Mortgage approvals remain low compared to long-term norms. Mortgage approvals continue to be substantially below the average monthly level of 87,500 seen since 1993, while a level of 70,000-80,000 has in the past been considered consistent with stable house prices.

"Despite current signs of improvement, the economic fundamentals still look far from rosy for the housing market with unemployment high and likely to rise further, earnings growth muted, debt levels high and the outlook uncertain."