by Mark Johnston
Mortgage Approvals Fall.
It seems that mortgage availability has increased substantially, by around one third, since the funding for lending scheme, which aimed to boost borrowing by providing banks with cheap finance, was introduced last year.
However, David Dooks, the British Bankers Association (BBA) statistic director, said “economic uncertainty and subdued confidence continues to determine borrowing behaviour, with households and businesses reducing borrowing and building up deposits where possible”.
So despite the funding for lending scheme net mortgage borrowing in March this year was down 0.1 per cent from the same month last year and mortgage approvals also fell, down 1.2 per cent to just 31,227, according to recent figures.
However, some data does show that mortgage approvals did rise modestly month on month in March after dipping to a seven month low in February.
Statistics from the Bank of England revealed that mortgage approvals dropped 4.7 per cent to 51,653 in February following a 2 per cent fall in January.
January marked the first drop in mortgage approvals after a five month streak of rises, which peaked in December 2012.
However analysis of mortgage approvals for house purchases throughout January show they were still at the second highest level for a year.
Some mortgage experts do state that “we would not attach too much importance to the slowdown in mortgage approvals over the last few months as it is likely that they were held back by the bad weather seen across the country”.
Mark Harris, chief executive of mortgage broker SPF Private Clients, suggests “while the funding for lending scheme has driven down mortgage rates and made more products available it still is not feeding through to a significant increase in lending volumes”.
All these figures therefore partly explain why the bank of England has decided to extend the funding for lending scheme.
This said, Howard Archer, chief UK economist at IHS Global Insight, comments that “despite the dip in mortgage approvals at the start of 2013, the majority of recent data and survey evidence suggest that housing market activity has firmed modestly overall in recent months, but remains far from racing ahead”.
The Council of Mortgage Lenders (CML) has also said that despite recent data it is still confident that activity will lift in the coming months amid better mortgage availability and a raft of lenders offering some of their lowest ever rates.
The National Association of Estate Agents (NAEA) has also revealed that the number of house hunters its members have recently seen has reached a five year high.
On top of all this the Nationwide building society has reported recently that house prices have edged up month on month.
Nevertheless, Ross Walker, analyst at the Royal Bank of Scotland (RBS), adds “housing is still expensive and unless you build more homes you are not going to bring prices down and you are not going to encourage people to borrow”.
All this said many experts believe that due to the current financial climate households, quite understandably, want to reduce their debt levels, not acquire more debt!
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