by Mark Johnston
The total value of home loans underwritten by many major lenders fell again according to a report from the British Bankers Association (BBA).
Industry trade organisation said that total mortgage lending fell 11% to £7.6 billion in June. The bank of England figures show that the number of mortgages approved for home purchases hit a new low in April 2011. At just 45,166 they were the lowest April figures since the banks records began in 1992.
However Brian Murphy at mortgage brokers the mortgage advice bureau sail that Aprils data was skewed, saying that he believed they had been affected by seasonal factors such as the rift of bank holidays and the royal wedding.
Many building societies reported that their own mortgage lending, despite falling between March and April, was still notably higher than a year ago.
Gross lending secured on dwellings rose marginally to £11.2 billion compared to £11.1 billion in March 2011. The bank of England also said net mortgage lending was just £0.7 billion in April 2011, which is up from £0.5 billion in March 2011 but low compared to long term norms.
The relapse in mortgage approvals in April 2011 from an already low level, reinforcing the belief that modest falls in house prices are more probable in the coming months.
Better mortgage rates for first time buyers with smaller deposits and the new stamp duty holiday, introduced by the government, of up to £250,000 for first time buyers could act to sustain momentum in the property market.
However figures suggest that the UK property market will remain subdued in the coming months, with a low level of sales and falling prices.
The investment bank Morgan Stanley predicted that UK house prices would continue to fall and drop by at least 10% between the end of 2010 and the end of 2012. This would lead to higher losses on mortgages and exposes a possible rise in negative equity to borrowers.
Although approvals were at an 11 month high in June, mortgage approvals on a whole are still very low compared to last year. With this in mind chief economist at (IHS) global insight, Howard Archer said “there is currently little evidence that the housing market activity is shifting up a gear”.
The number of new approvals for home purchases was down by 6% on a year ago at 31,747. The average approval value in June was £149,700, o.6% lower year on year. These mortgage numbers are part of a generally bleak assessment from the British Bankers Association (BBA)
The financial services consumer panel (FSCP) has outlined a six point plan for a ‘sustainable and healthy mortgage market’. It wants to see the Financial Services Authority’s (FSA) mortgage market review to include, amongst other things, effective regulation to help consumers.
Chair of the Financial Services Consumer Panel (FSCP), Adam Philips stated that he believed “over the past few years we have seen some reckless lending by banks therefore stronger regulation is undoubtedly needed to stamp out bad behaviour”.
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