by Mark Johnston
Mortgage approval figures for July 2011 showed a renewed interest in the property market and a 14 month peak high.
Augusts 2011 mortgage lending was also up 6%, although experts believe that this was only due to mortgage providers such as Nationwide and the Post Office slashing their rates on a range of fixed rate deals.
Richard Sexton, business development director of e.surv believes that this is “just a flash in the pan” and adds “these figures merely reflect a concerted effort from lenders to meet their lending targets, little more”.
The British Bankers association (BBA) said that reports for August suggests that mortgage activity may have been stimulated by some growth in the buy to let market as rental yields continue to improve.
With more mortgages being granted for buyers in the UK property market experts are divided over whether this is a blip or the start of the road to recovery.
However in September 2011 figures from the bank of England showed that approvals fell for the first time in 6 months, with just 50,967 loans agreed which is down from the 52,347 loans agreed in August 2011. The bank of England insisted that this was the first dip since April 2011.
These figures are well below the pre crisis long run average of around 90,000 and this level of mortgage activity is significantly lower than the 70,000 to 80,000 approvals that are considered as consistent with stable house prices.
Net mortgage lending has also slowed for the second month in a row, which points to further weakness in the housing market. Analysts remain concerned as mortgage approvals are still historically low.
Samuel Tombs of Capital Economics states “Septembers lending figures confirm that constraints on the supply of credit are still acting as a major brake on the economic recovery”.
Consumers are reluctant to take on more credit for major purchases as bank lending conditions are relatively tight and uncertainty over jobs is weighing on sentiment.
Bob Pannell, chief economist for the Council of Mortgage Lenders (CML) said that it is “disappointing economic growth, strong consumer price pressures, falling disposable incomes and an uncertain jobs market that is preventing people from buying property”.
In reality, lenders are stuck between a rock and a hard place. On the one hand they have a commitment to improve their capital, while on the other they are under political pressure to increase lending.
Many experts believe that the next few months are likely to see suppressed activity in the mortgage market as lenders try to recoup equity and nurse balance sheets that still have to juggle a variety of risks.
These experts also feel that ongoing turmoil in the wider economy, specifically the recent euro zone crisis means a recovery in mortgage approval rates seems highly unlikely in the near future.
Research shows that many people are becoming less excited about the prospect of owning their own property due to the high costs and difficulty in obtaining their first mortgage.
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