Mortgage approvals hit 15-month high in June

Published 24th Jul 2009

Loans for house purchases up 65% on the same time last year, while the average value of mortgages falls 11%


The number of mortgages approved by banks for house purchases rose to a 15-month high in June, figures showed today.

A total of 35,235 homebuyer loans were approved during the month, up from 31,919 in May and 65% higher than in the same month last year.

The number of approvals for purchases and their average value has risen steadily over the past six months, and has almost doubled since reaching a nadir in November last year, when just 17,953 loans were approved, a trend the British Bankers' Association said reflected "some improvement in lenders' ability to lend".

However, falling house prices and lenders' reluctance to offer high loan-to-value mortgages mean the average value of house purchase loans approved in June was down 11% year-on-year at £136,000.

The BBA's figures for June also showed an increase in the number of remortgages approved over the month, from 25,825 in May to 28,133.

Remortgaging numbers had been falling sharply as a combination of low interest rates and falling house prices made switching lender more difficult and less attractive, and the number of remortgages approved by banks is running at half last year's level.

This increase in June could reflect fears that interest rates may start to rise, with borrowers trying to lock into a good deal before they do.

The BBA said net mortgage lending, which strips out redemptions and repayments, edged higher, by 5.1% year-on-year to £2.6bn in June, to take the total for the first six months of 2009 to £18.1bn.

Savings on the rise

The amount of money flowing into savings accounts increased sharply over the month, from £289m in May to £3.2bn in June, while unsecured borrowing remained muted. Overall, borrowers repaid £100m in June, with repayments on credit cards totalling £6bn against new borrowing of £5.8bn.

The BBA's statistics director, David Dooks, said: "After repayments and redemptions, the banks' net rise in mortgage lending of £18bn in the first six months is in sharp contrast to lending by the rest of the market, which is still contracting.

"People are showing little appetite for unsecured borrowing and are generally keeping more money in their accounts."

The figures are the latest sign that activity in the housing market may be starting to pick up after months of stagnation. However, commentators said activity was still muted by long-term trends and consistent with falling house prices.

Howard Archer, chief UK economist at IHS Global Insight, said: "We suspect that housing market activity is likely to remain muted compared to long-term norms for some time to come, given still tight credit conditions and poor economic fundamentals, despite the improvement seen from earlier this year.

"Elevated and still markedly rising unemployment, muted wage growth and an ongoing unwillingness of many people to actually commit to buying a house when they still have serious concerns about the economic and jobs outlook are all factors that are likely to limit the upside for the housing market for some time to come."

Andrew Montlake, director of mortgage broker Coreco, said: "From where I'm standing, the next few months are still going to be exceptionally difficult for borrowers and this will only change once the lenders begin to lend – and they're still not lending at levels sufficient to drive a sustained recovery in the property market."

Source: ' Guardian '

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