Mortgage approvals show annual rise
Jun 24 2009 by Nevill Boyd Maunsell, Birmingham Post
The big banks approved 31,162 mortgages for house purchase in May, up from a low of 17,953 in November last year and 15.8 per cent more than in May, 2008.
That stands against 29,018 house purchase mortgages approved in April and an average of 25,032 over the previous six months. These loans had an average value of £133,600, 13.9 per cent less than last May, due to the fall in house prices over the 12 months.
The British Bankers’ Association pointed out, though, that both the number and average value of house purchase approvals has risen steadily over the past six months, reflecting some improvement the ability of lenders to lend.
Despite that, the number of re-mortgages approved continues to dwindle – to 24,847 last month from a recent average of 28,234 and 60.2 per cent fewer than in May last year.
This falling trend in re-mortgages reduced the value of gross mortgage lending in loans actually completed in May to £7.7 billion, less than in any month since February, 2001 and less than half the total in May last year.
Repayments reduced the month’s net mortgage lending to £2.3 billion, again the weakest monthly increase since early 20901.
“Steady monthly increases since last November have seen the number of loans approved for house purchase recover to levels seen in early 2008, although gross and net mortgage lending show a subdued wider mortgage picture,” said David Dooks, the BBA’s statistics director.
“However, unlike much of the mortgage market, the high street banks are still seeing lending growth and improved mortgage availability is reflected in higher average loan approval values.”
Howard Archer, chief UK and European economist at IHS Global Insight, said “The on-going limited rise in mortgage approvals in May reported by the BBA adds to the now pretty widespread evidence that housing market activity is trending up gradually, but steadily.
“Nevertheless, housing market activity is still weak compared to long-term norms.”
Mr Archer noted the number of house purchase approvals in May is still only around half the monthly average reported by BBA over the past 12 years.
“Housing market activity is still down at a level consistent with falling house prices,” he added
“Furthermore, interest rates for fixed rate mortgages are starting to rise as monthly markets increasingly price in future interest rate hikes by the Bank of England. Consequently, we are sticking for now to our forecast that house prices will fall by another ten per cent from current levels to trough around mid-2010.
“However, we accept this could turn out to be too pessimistic, particularly if the economy sustains its recent improvement and unemployment rises less than we fear.”
Meanwhile, unsecured consumer credit remains subdued. New spending on credit cards has been closely matched by repayments at a rate of about £6 billion a month.
Weak demand for new personal loans reduced the total lent in May to £1.4 billion, down from a recent average of £1.6 billion and 40.1 per cent less than in May last year.
Last month’s overdraft lending of £100 million recovered ground lost in April, but the combined total fell 2.1 per cent short of last May’s.
