Mortgage Approvals on the Increase At Last?

by Mark Johnston

New deals spark a rise in mortgage approvals. Many lenders are now starting to loosen their criteria, thus helping first time buyers to qualify for their mortgage deals. Lenders are also currently increasing the number of mortgage deals. With higher loan to value, these require lower deposits.

Northern rock is offering a 5.65% fixed rate (up to September 2013) deal with a 90% loan to value with a fixed 4.88% 2 year tracker rate and the Abby building society also offers a 90% loan to value deal with a 5.99% that is foxed until July 2013.

Director of flower (IFA), Greg May said that it was “encouraging to see that mortgage finding is getting easier for first time buyers to obtain”.

The number of mortgages that were approved by lenders for house purchases 4% to 48,421 in June 2011 this is an increase from the 46,418 approvals in May 2011.

Although mortgage approvals hit a 13 month high last month, some economists cautioned that they remained low by long term standards.

There is a modest pick up in mortgage approvals according to senior economic adviser to the Ernst and Young ITEM club, Andrew Goodwin. However in the wider scheme of things the housing market is still pretty much flat. The Nationwide building society monthly survey of house prices showed a sluggish but roughly stable market, in that prices rose 0.2% in July 2011, an average of £168,731, after being flat in June 2011. These figures showed the average house price was therefore 0.4% off its level a year ago.

The number of home buyers was up 20% on March last year, although this was a month when mortgage approval was still near record lows.

By comparison most approvals for home purchases are running at just 58% of the average monthly level of 60,000 seen since 1997. According to the British Bankers association there were 34,905 mortgage approvals in the last month this was however 14% lower than the previous 6 month average.

The number of approvals for re mortgaging increases by 5% to 30,755, even with the threat of rising interest rates. The Bank of England also reported a net mortgage repayment of £100 million in June, bringing total gross lending secured on homes down to £11.2 billion.

Net mortgage lending fell by £69 million in May 2011 according to sources at the Bank of England. This indicates that people are generally paying off mortgages faster and not loading themselves with mortgage debt.

Howard Archer, chief UK economist at (IHS) global insight suggested that, ”consumer appetite for taking on new borrowing remains limited as there is a clear desire of many consumers to reduce their debt.

Hopefully with many first time buyers finding it easier to obtain good mortgage deals, more and more lenders may start to offer higher loan to value deals in the very near future.

Property economist at Capital Economics, Paul Diggle said he “doubted that the rise in the number of mortgage approvals means the start of a recovery in housing market activity. The bigger picture is that the level of mortgage approvals is consistent with sharp falls in house prices”.

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