Mortgage approvals at five-year high

House with 'for sale' sign outside Mortgage approvals rose to a five-and-a-half year high in August

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The number of mortgage approvals rose to a five-and-a-half year high in August, according to the Bank of England.

But analysts noted that lending volumes were still well down on both pre-crisis and long-term averages.

Mortgage approvals rose to 62,226 in August from 60,914 the month before.

Samuel Tombs, UK economist at Capital Economics, said activity in the mortgage market was still relatively weak despite talk of a housing bubble.

"Although this took the level of approvals to its highest level since February 2008, they are still around 40% down on the levels seen before the financial crisis," he said.

Mr Tombs also noted that net mortgage lending totalled £1.0bn in August, compared with the £0.7bn average of the previous two years.

"For now, then, there appears to be little evidence that a renewed boom in the housing market is underway," he said.

Low base

The figures come a day after it was announced that the second stage of the Help to Buy scheme in England would be launched three months earlier than planned.

The first phase of the scheme was launched earlier this year and provides equity loans for buyers of new homes.

However, it will now be extended to help buyers of existing homes, allowing people to buy with just a 5% deposit.

The government will guarantee a proportion of the loan to give the banks greater confidence to lend.

Prime Minister David Cameron announced the earlier launch of stage two of the scheme as the Conservatives gathered in Manchester for their annual conference.

He rejected fears the Help to Buy scheme would fuel a housing bubble, telling the BBC the market was "recovering from a very low base" and first-time buyers needed help to get on the housing ladder.

David Tinsley, UK economist at BNP Paribas, said the government's announcement that the second stage of Help to Buy scheme would start early would push mortgage figures up in the coming months.

"By the end of the year approvals could comfortably be in the 70 to 75,000 range," he said.

Critics say the Help to Buy scheme does not address the issue of high demand for a limited supply of properties, prompting concerns about affordability.

Bringing forward the second phase of the Help to Buy scheme is "less than responsible", the British Chamber of Commerce has said.

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