British mortgage approvals stalled unexpectedly in May and a surprise pick up in lending failed to excite analysts who still expect lacklustre housing market activity to accompany a slow economic recovery this year.
However, the money supply figure the Bank of England's prefers to use to measure how its unprecedented 200 billion pound asset-buying spree is filtering through to the economy posted its strongest rise since late 2007.
BoE figures recorded 49,815 mortgage approvals in May, down fractionally from 49,828 in April and under economists' forecasts of 51,000.
The mortgage approvals figures point to muted house price rises in the coming months and are well below levels seen at the end of last year, never mind those during the housing market boom of the last decade.
"Approvals for house purchase remain around 15 per cent below their November peak and 50 per cent below 2006 levels," said Paul Diggle, a property economist at Capital Economics.
"Today's numbers seem to confirm that the weak economic situation and uncertainty surrounding the impact of the fiscal squeeze continue to weigh on mortgage demand."
Britain's new coalition government has embarked on the harshest austerity drive for decades to cut a record budget deficit running close to 11 per cent of national output, raising concerns the economic recovery could prove slow and uneven.
Analysts were not overly impressed with a stronger than expected - but historically unremarkable - increase in net mortgage lending in May.
Net lending rose to £1.2 billion from £979 million in April. Consumer credit rose faster than forecast to £331 million in May from a net repayment of £114 million in April. However, credit card lending posted its weakest reading since September 2009.
The Bank of England has said lending conditions remain constrained but there have been tentative signs that credit flows are picking up following Britain's deepest recession since at least World War Two.
Alongside slashing interest rates to a record low of 0.5 per cent, the central bank has pumped 200 billion pounds of funds into the economy by purchasing government bonds with newly created money in a bid to boost nominal demand.
However, money supply figures have given a mixed picture as to whether this policy of quantitative easing has improved conditions outside the financial sector.
The BoE's preferred gauge of money supply, M4 excluding intermediate other financial corporations, rose by 9.2 per cent in May on a three-month annualised basis, its fastest rise since the third quarter of 2007.
However, the annual rate of growth of the headline M4 measure rose by just 2.8 per cent in May, the weakest since April 1993.
Reuters