Training | 2009.10.29
Mortgage approvals at 18-month high
Number of mortgages approved in September hit 56,000, but the figure is below the level consistent with a stable housing market
The number of mortgages approved for house purchases climbed to an 18-month high in September, but the number of borrowers remortgaging continued to decline, figures from the Bank of England showed today.
A total of 56,215 house purchase loans were approved during the month, up from 52,970 in August and above the previous six-month average of 48,221.
The number of homebuyers was more than double the low reached last November when the housing market was in the doldrums, but despite reaching its highest level since March last year it remains low by historical standards.
Over the 12 months to September, however, remortgaging activity dropped by 64% with the number of remortgage approvals falling to 25,528 from 72,000 last September.
Activity has been driven down by tightened lending criteria and sharp cuts in the Bank of England base rate, which mean it is cheaper for many borrowers to stay on their lender\'s standard variable rate than to switch at the end of a special deal.
Although the total number of mortgages approved during the month was higher than August\'s figure – reaching 109,700 when remortgages, house purchases and other loans secured against property were taken into account – the value of that lending dropped to £11.7bn from £12bn.
Total net lending secured on properties – the figure for mortgages paid out to consumers over the month after repayments and redemptions are taken into account – also fell, from £1.28bn in August to £922m. However, it remained above the previous six-month average of £600m.
The value of unsecured consumer credit – money borrowed through loans, credit cards, overdrafts and other credit agreements – fell by £0.3bn over the month as consumers continued to pay down debt. This is the third month running that the net lending figure has been negative.
Modest improvements
Howard Archer, chief UK economist at IHS Global Insight, said the pick-up in house purchase lending had been driven by low interest rates and falling house prices, which had made homes more affordable.
But he said the increase had to be put into perspective: "The rate of improvement in housing market activity has been modest overall, with approvals in September still only 10,833 higher than they were back in April.
"Furthermore, at 56,215 in September mortgage approvals remain well below the average 93,000 a month seen between 1993 and 2009. It is considered that normally monthly mortgage approvals of 70,000-80,000 are consistent with stable house prices."
Separate figures from the Building Societies Association (BSA) showed the value of mortgages approved by its members increased in September to £1.5bn. Gross lending was also up, at £1.6bn compared with £1.5bn in August, but the BSA said activity "remains considerably more subdued than a year earlier".
The BSA\'s director general, Adrian Coles, said buyers and sellers were "tentatively" returning to the market. "Lending is still at levels much below that of previous years and the slight recovery remains fragile," he said.
"A further constraint on lending remains the conditions in mortgage funding markets, although wholesale markets have shown signs of opening up slightly."
Meanwhile, the BSA said savings balances reduced over the month as consumers withdrew £895m from building society accounts.
Coles said savers faced "very challenging conditions" with low interest rates and rising unemployment putting pressure on deposits.
He added: "While these factors are affecting all deposit takers, institutions that have explicit government backing should ensure that they do not exploit this unfair advantage and distort competition."
For more information, please visit
http://www.guardian.co.uk/money/2009/oct/29/mortgage-approvals-high
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