UK mortgage approvals fall less than expected in Feb

U.K. mortgage approvals fell less than expected in February, a sign that demand for housing remained resilient before tax changes take effect in April.
Banks advanced 73,871 loans, compared with 74,085 in January, which was the highest level in two years, the Bank of England said in London on Thursday. While this was the first fall in five months, economists had forecast a bigger drop to 73,500. Net mortgage lending dipped to 3.6 billion pounds, from 3.7 billion pounds a month earlier.
The data underscore strength in the U.K. housing market as investors rush to buy properties before a tax increase on second homes and rental purchases. Officials at the central bank have warned buy-to-let mortgages represent a growing threat to financial stability and this week recommended tighter lending criteria and tougher affordability tests.

Housing Risks
Demand is also being fueled by low borrowing costs, with the central bank saying the effective interest rate on outstanding mortgages fell one basis point to 2.95 percent in February. The BOE’s Financial Policy Committee is on the front line, using macroprudential measures to guard against risks from the housing market since benchmark rates have been at a record low 0.5 percent for more than seven years.
The effective rate on new secured loans rose to 2.5 percent.
Net lending to consumers rose 1.3 billion pounds in February, compared with 1.6 billion pounds in January. Business lending increased 3.3 billion pounds, with small and medium sized businesses taking 652 million pounds of loans, the most since the BOE began collecting the data in 2011.
M4, a broad measure of money supply, rose 0.9 percent on the month and 2 percent from a year earlier. An underlying measure of M4 increased 5 percent on a 3-month annualized basis.
The BOE also said overseas investors sold a net 3 billion pounds of gilts following net sales of 6.3 billion pounds in January.

Property Prices Have Gone Up Faster Than Thought
Housing-obsessed Britons have something new to fixate on: property prices may have increased more than previously thought.
A new official house-price index, designed by the Office for National Statistics, shows values rose an annual average of 6.1 percent between 2003 and 2011. That’s substantially more than the Land Registry’s estimate of 4.6 percent.
The updated methodology seeks to clarify the often conflicting picture painted by a multitude of price indexes published in the U.K. With the various measures — including two separate official gauges — regularly diverging on the direction of values, the ONS has been working since 2010 on this all-encompassing measure.
The U.K. House Price Index, to be published for the first time in June, will replace the existing official ONS and Land Registry measures and is designed to address their limitations. The current ONS data doesn’t capture cash purchases, which account for as much as 40 percent of all transactions, while the Land Registry doesn’t include sales of new builds.
The impact of these changes mean the new index shows the average home price in December 2011, the most recent period covered in the ONS estimates, as being 185,000 pounds ($267,000) in England and Wales. This is lower than the 222,000-pound price recorded by the current ONS gauge for England for the same month, and above the equivalent 157,000-pound level recorded by the Land Registry.
It’s also above privately produced house-price indexes by Halifax and Nationwide, which showed the overall U.K. average as 157,000 pounds and 163,000 pounds respectively.