Mortgage approvals continue to rise

New figures from the British Banker’s Association (BBA) show that the mortgage approvals are continuing to increase, although the banks’ net mortgage lending of £2.3bn was the weakest monthly rise since early 2001.

BBA statistics director, David Dooks, said:

“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. 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.”

“Consumers’ borrowing appetite remains weak, reflecting uncertainty over household circumstances,
so credit growth is negligible and spending activity on credit cards is down on this time last year.
Lending to non-financial companies was little changed overall in May.”

The BBA attributes the drop in gross mortgage lending to much weaker remortgaging numbers in recent months. However, the number of house purchase approvals rose, as did the value of loans approved for house purchase rose. Their average value has risen steadily in the last six months, which the BBA states is a reflection of the improvement in lenders ability to lend. In addition, while approvals for remortgaging and other purposes are lower than a year earlier, the BBA states that the trends appear to be stabilising

Commenting on the data released, RICS chief economist Simon Rubinsohn said:

“Data released from the BBA this morning shows activity in the housing market improved in May with the number of mortgages approved for house purchase climbing to its best level since April last year. This pick-up in demand is broadly consistent with the rise in buyers enquiries signalled in the monthly RICS housing market survey. Indeed, the continuing strength of the latter series suggests that property transactions could rise a little further over the coming months.”

“However, the continuing lack of mortgage finance for first-time buyers allied to a diminishing stock of instructions on estate agents books remain very real issues for the housing market to deal with. A move back to 40,000 mortgage approvals per month on the BBA data is conceivable by the year end but this compares with an average of 63,000 in 2005, 57,000 in 2006 and 69,000 in 2007.”