UK mortgage approvals rise to a 17-month high as chancellor meets with lenders to discuss Help to Buy

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Some 37,278 home loans were approved in June 2013 – a 17-month high – according to a report from the British Banker’s Association.

While this came in below analysts' expectations of a rise to 38,500, mortgage approvals were still up 32 per cent from June 2012 and 17 per cent from the 2012 average. It was also up 2.7 per cent from the month before.

Meanwhile, lending to non-financial firms increased for the first time since January 2013 and the value of house purchase mortgage approvals was up slightly to £5.7bn from £5.6bn in May.

Howard Archer, chief UK and European economist at IHS Global Insight, says this adds to "a plethora of recent data and surveys indicating that housing market activity is now really stepping up a gear" and expects house prices to see "solid but relatively limited increases" over the rest of the year, before strengthening "more markedly" in 2014.

Nevertheless, there is a very real and growing possibility that with market activity now seemingly gaining appreciable momentum, house prices could surprise on the upside over the second half of in 2013, especially as a shortage of new properties for sale is currently providing support to house prices in some areas, notably London and the South East.

This comes as chancellor George Osborne meets with major housebuilders and mortgage lenders this morning to discuss an extension of the Help to Buy scheme.

The first stage of Help to Buy was launched in April, offering loans for new-build homes with a five per cent deposit. The second stage, mortgage guarantees, will launch in January and see the state take on some of the default risk by guaranteeing a proportion of the loan.

Commenting on government schemes to boost lending, Archer says:

A major part of the government initiatives (specifically, the “Help to Buy” mortgage guarantee scheme) to lift mortgage lending and boost housing activity will not take effect until 2014, when a stronger rise in housing market activity and house prices is looking ever more probable assuming that the economy is improving gradually as we anticipate. Indeed, there is serious concern that the “Help to Buy” mortgage guarantee scheme could eventually fuel a housing price bubble. While we suspect that this is unlikely to occur in the near term at least given the current pressure on households, it is clearly something that policymakers will need to keep a very close eye on.

UPDATE: Osborne helpfully informed his followers that the meeting was "good".