25
Aug
Steady rise in mortgage approvals
The number of mortgages approved for house purchases by the
major High Street banks has risen to a 17-month high, figures
show.
The British Bankers' Association (BBA) said approvals in July
stood at 38,181, a rise of 7.4% compared with June and 77% higher
than a year ago. The data suggests the rise in activity and prices
could stretch into autumn. However, the BBA warned that new lending
was below seasonal expectations despite greater demand from
borrowers.
Changing picture
The number of loans approved for people buying a home in July
was at its highest since February 2008.
Banks had been more forthcoming in mortgages available to
potential buyers, with the average amount borrowed at £139,700
in July. However, the BBA's statistics director David Dooks said
that banks were still being "more realistic" about how they should
lend to compared with when the property boom was at its peak. He
said the ability of potential buyers to pay a deposit and long-term
sustainability were key issues when banks decided whether to offer
a mortgage. Property prices would also "stall" for some time. "It
is a different marketplace to where we have been in the past," he
said.
Future building
The figures come after two of the UK's major housebuilders gave
a guarded outlook regarding the property market.
Bovis Homes, which on Monday reported a pre-tax loss of
£8.6m in the six months to June, said it was worried about the
potential impact of rising unemployment on house prices. Although
it said that the housing market had shown signs of stabilisation in
the first half of 2009, it feared continued low levels of activity
owing in part to the continued squeeze on mortgage availability.
This was echoed by the UK's largest housebuilder Persimmon which
said that "mortgage availability continues to be a concern". It
said that selling prices had stabilised in most parts of mainland
UK, most strongly in the south of England and more latterly in the
north of England. "Future volume increases and price movements will
be dependent upon mortgage availability, job prospects and the
health of the general economy," said Persimmon chairman John
White.
Actual sales
The swelling numbers of people buying a property as the year has
progressed was shown in the latest figures from the UK's tax
authority. Some 82,000 UK residential properties costing more than
£40,000 were sold in July, according to HM Revenue and Customs
(HMRC). This was up from 75,000 the previous month and was double
the number of sales reported in January. The total was close to the
74,000 sold in July 2008, but was still well down on the same month
in 2007 when 151,000 were sold. The BBA said that slow housing
market activity meant it was taking longer for mortgage approvals
to work their way through to actual lending. Gross mortgage lending
by the major banks stood at £8.4bn in July, up from
£8.1bn the previous month. However, net lending, which strips
out repayments and redemptions, remained "weak" at £1.6bn -
showing that people were paying off mortgages not far from the rate
at which new ones were being taken out.
Mortgage costs
The difference between the costs for mortgage lenders and the
amount of interest they charge for fixed-rate home loans continues
to grow, according to financial information service Moneyfacts. It
said that institutions were looking to repair their balance sheets
after the banking crisis by failing to reduce mortgage costs
despite the fall in swap rates, which are the guide prices used by
lenders on long-term loans. The margin between the rate for average
two-year fixed-rate mortgage - 5.18% - and the two-year swap rate -
2.04% - stood at 3.14%, the highest on record, Moneyfacts said.
"Normal rules where lenders pass or decrease rates based on the
cost of funding seem to have well and truly gone out of the
window," said its spokeswoman Michelle Slade. Figures from the BBA
also show that credit card spending and savings put in banks have
stabilised as households focus on managing their personal finances.
The demand for personal loans has also dropped.
BBC News. Steady rise in mortgage approvals. [Online]. Available
from: http://news.bbc.co.uk/1/hi/business/8219710.stm
Accessed 25th August 2009.