Mortgage approvals up in May

Figures released by the Bank of England show that the number of new mortgage approvals for home purchases in May were 117,000, up from 106,000 in April.

Approvals, which are an indicator of housing market demand, are up 23.2% from the same period last year and are well above the historical average of 97,000 per month. Demand conditions have been firm for most of the year with approvals levels very close to their level at the turn of the year.

A reacceleration in the housing market is backed up by Royal Institution of Chartered Surveyors and estate agents who have reported that new enquiries from would-be buyers surged upward in May.

Furthermore, surveyors reported prices rising at their fastest pace since mid 2004. This coincides with figures released today by Nationwide which show that the annual rate of house price inflation increased to above 5%.

With the economy likely to grow at or above trend in 2006, RICS expects housing demand to stay well supported. Recent falls in share prices are not expected to affect the property market, but stretched affordability levels and significant increases in the amount of property coming onto the market, are expected to keep a lid on price rises throughout the rest of the year.