The number of British loans approved for house purchases rose in December for the first time in seven months, the Bank of England said on Tuesday, suggesting that the property market slowdown could be moderating. Mortgage lending and consumer borrowing also picked up following a weak November, which analysts said meant the BoE is likely to leave interest rates steady at 4.75 percent for several months more while a clearer economic picture emerges.
But it may still be too early to call a peak in rates, as minutes of the BoE's last meeting revealed some policymakers judged that indicators of the housing market appeared stronger than they had expected in November.
"If this is the worst that it's going to get, it may well not be weak enough for the Bank," said Robert Prior-Wandesforde, an economist at HSBC. "That means we're not out of the danger zone yet as far as possible rate hikes are concerned."
The number of loans approved for house purchase - loans agreed but not yet made and often viewed as a good leading indicator of house price inflation - rose to a seasonally-adjusted 83,000 in December.
But that was up only slightly from a 9-1/2 year low of 77,000 in November, and is down more than a third on a year ago.
Most economists agree that this level of approvals is consistent with stagnation in the housing market after several years of double-digit inflation in home prices.
A separate report from the Council of Mortgage Lenders said on Tuesday that affordability continued to worsen and the number of first-time buyers fell across the UK last year.
"There may be a little firmness coming back but generally I think this cooling trend is going to continue for most of this year," said Ross Walker, UK economist at RBS Financial Markets.
A report from the Chartered Institute of Purchasing and Supply/NTC Research showing the weakest growth in British manufacturing business in 1-1/2 years also supported the view that rates will remain on hold in future months.
The BoE said net mortgage lending rose 7.1 billion pounds in December, more than the 6.4 billion rise in the previous month, although the annual rate of growth slowed to 13.0 percent from 13.4 percent, the slowest pace since October 2002.