Mortgage Approvals in January

by Mark Johnston

The housing market is a vital component of consumers wealth in Britain and official data has shown that the sluggish housing market may be improving. Figures for mortgage approvals have suggested a .25 month high.

The Bank of England has released data for consumer credit that shows gross mortgage lending was 10% higher in January 2012 than in the same month last year.

The Council of mortgage Lenders (CML) said that gross mortgage lending totalled £10.5 billion in January and is the sixth consecutive year on year rise.

The Building Society Association (BSA) members carried out £1.9 billion of gross mortgage lending in January,up from £1.4 billion in January 2011.

BSA director general Adrian Coles said “new lending and approvals for house purchase picked up across the market in January”.

Other data published has revealed that the number of loan approvals for house purchases increased to 58,728 which is the highest level since December 2009 and also higher than the previous 6 month average of 52,839.

However, Samuel Tombs, United Kingdom economist at capital economist. Suggested that although figures have generally improved, they are still consistent with a sluggish pace of economic recovery.

Many experts believe that these increases are likely to have been caused by a surge in first time buyers trying to secure a home before the stamp duty on cheaper properties is reintroduced on March 25th.

Victoria Cadman, of investec, suggests “ on the face of it these look like a promising set of figures, with the balance for mortgage approvals at the highest level since December 2009. But there is a distortion at the moment from the first time buyer stamp duty holiday expiring in March.

However, on analysis by HM Revenue and Customs (HMRC) of the impact of the tax relief on house purchase costs caused dought on the suggestion that the relief has increased purchases by first time buyers. It is estimated that most of the people who benefited from the relief would have purchased property in its absence anyway.

The HM Revenue and Customs calculated that the boost to purchases as a result of the measure was around 2% at the most.

The number of approvals for re-mortgaging did decrease in January however, to 31,952 which was lower than the previous 6 months average of 33,039.

Before the 2008 financial crisis, monthly mortgage approvals ran at around 90,000.

The drop in re-mortgages may show that home owners are betting on rates staying where they are for quite some time yet and given the challenges the economy still faces,money experts believe they may well be on the money.

William Hunter founding director at Hunter wealth management has said “ the number of new home loans will almost certainly settle down in the months ahead”.

Mark Horns,chief executive of mortgage broker SPF private clients said “ January’s increase in lending did not signify a sustained recovery” and added that “many prospective buyers were still struggling to borrow a mortgage”.

Despite the recent pick up, housing market activity is still low compared to long term norms. Economic fundamentals still look far from rosy for the housing market

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