U.K. House Prices Rise on Lending Boost From BOE Credit Plan

U.K. house prices rose in January as the Bank of England’s credit-easing program helped loosen the mortgage market, Nationwide Building Society said.

The average cost of a home increased 0.5 percent from December to 162,245 pounds ($256,100), the Swindon, England-based customer-owned lender said today. Prices were unchanged from a year earlier. Separately, GfK NOP Ltd. said its index of consumer confidence rose in January.

Data yesterday showed mortgage approvals rose to an 11-month high in December as the central bank’s Funding for Lending Scheme eased conditions in the home-loan market. The BOE is counting on the program to encourage lending and provide a boost to an economy that’s close to slipping back into a recession.

“The FLS has achieved some success in bringing down mortgage rates, with some signs of a pickup in lending activity,” said Robert Gardner, chief economist at Nationwide. “Hopefully, the momentum will continue to build in the months ahead, though much will depend on whether the wider economic environment improves.”

Consumer Confidence

GfK’s consumer sentiment gauge rose to minus 26 from minus 29 in December. However, the survey was conducted before data were published last week showing the economy shrank 0.3 percent in the fourth quarter, putting it on the brink of a triple-dip recession.

Barclays Plc economists Chris Crowe and Blerina Uruci also noted that the increase in was partly due to an increase in the major purchases component, “which has a significant positive seasonal factor in January driven by price discounting.”

“We do not expect a strong improvement in consumers’ financial situation in the near term as slow earnings growth and persistent inflation will likely continue to depress real earnings,” they said in a note today. “With economic and labor-market uncertainty driving precautionary savings to elevated levels in recent quarters, we think consumers will have little room to increase spending.”

In its report, Nationwide said that U.K. house-price growth slowed to 0.4 percent in the three months to January from 0.7 percent in the fourth quarter. A drop in first-time buyers to an average 20,000 a month from 32,000 before the financial crisis is a “cause for concern” on the outlook for residential property, it said.

While mortgage approvals are rising, they are still less than half the level in the decade through 2007. Bank of England Governor Mervyn King said last week credit conditions have eased and should improve further as the impact of the bank lending plan “kicks in.”

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