Mortgage Approvals on a High in July

by Mark Johnston

According to the latest figures from the bank of England mortgage lending is starting to pick up. The squeeze on mortgage borrowers is easing. Approvals are now at their highest levels since 2010, as building societies and banks continue to increase their lending to prospective buyers.

In July 2011 49,239 mortgages were approved, however they are not yet lent to house buyers. This figure is slightly up from June’s figures of 48,500 and above the previous 6 months average of 46,822. Although they are only up marginally on the 48,562 loans approved in July 2010.

Total lending secured in houses rose by £0.7 billion over the month compared with the previous 6 month average of £0.9 billion.

This was the third month increase in a row meaning approvals were 3% higher than in July last year. These figures suggest that sales may start to rise gently in the coming months.

HM Revenue and Customs (HMRC) figures showed that 79,000 houses were sold in July in the UK.

These figures come on the day that the National Housing Federation (NHF) predict that levels of home ownership would slip over the next decade as a shortage of homes drives a rise in prices.

However the number of approvals for re mortgaging is virtually flat, it increased by just 20 to 30,810 this was lower than average over the past 6 months at 31,340.

Experts expect house prices to fall by around 5% by mid 2012 as a result of troublesome economic fundamentals and low consumer confidence.

As economist at Societe Generale, Bill Hillard adds “interest rates have fallen but consumer confidence is very low and the market is still ‘overvalued’. This is a recipe for continuing weakness. The housing market is stuck in a deep ‘rut’ and there is little prospect of any major improvement any time soon”.

Mortgage lending however remains at around half of the levels seen in the years before the 2008 financial crisis. Senior economic adviser to the Ernst and Young ITEM  Club, Andrew Goodwin states” it is difficult to get too excited about the pick up in mortgage approvals, it is still very low in a historical context and the market still remains stagnant”.

As seen fears about the health of the housing market persists.

Director of mortgage brokers Oblige, Chris Gardener said that “persistently low interest rates and a steady trickle of enticing deals from lenders are being drowned out by the ‘drumbeat’ of bad economic news. Where once buying a house was seen as a big aspiration for many people, most now see it as increasingly out of reach”.

However other figures from the bank of England showed that consumers have reduced their borrowing since the bank crisis of 2008.Consumer credit such as bank loans, overdrafts, hire purchase deals, student loans and credit card debts fell again in July to £209.4 billion. The lowest level since September 2005 and down by 12% from September 2008’speak of £236.8 billion.

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