UK mortgage approvals rise to year high

Source : Business Times – 19 Sep 2009

UK mortgage approvals by the nation’s six biggest banks increased for a seventh month in August to the highest level this year, a sign that the housing market slump is easing.

The number of loans granted by the institutions rose to 57,000 from 53,000 in July, according to a sample from the Bank of England’s lending panel released yesterday in London. That is the highest since records began in December. Banks also indicated that the stock of loans to companies deteriorated further in August after the weakest month on record in July.

The Bank of England this month kept up its programme to buy bonds with newly created money to bolster lending and stimulate economic growth. While reports from mortgage lenders and surveyors suggest that property prices have stopped falling, declines may resume if rising unemployment prompts homeowners to sell their properties.

‘Mortgage lending picked up slightly,’ the central bank said in a statement.

‘That is consistent with the recovery in their approvals for house purchase’, though ‘major UK lenders remained cautious about the prospects for house prices and unemployment’. Separately, the UK’s statistics office said yesterday that Britain posted the biggest budget deficit for any August since modern records began in 1993 as the recession destroyed taxes.

The UK housing market may have stabilised after more surveyors reported a gain in home values than a drop for the first time in two years, a report by the Royal Institution of Chartered Surveyors showed on Sept 15. A majority of Britons say that now is a good time to buy a home, a survey by the Building Societies Association showed this week.

The Bank of England’s sample covers data from Banco Santander, Barclays plc, HSBC Holdings plc, Lloyds Banking Group plc, Nationwide Building Society and Royal Bank of Scotland Group plc. Together, they accounted for about 70 per cent of mortgage lending at the end of 2008.

Lending to companies dropped further as some businesses paid back bank debt with proceeds from capital-market issuance, the central bank said.

‘Lenders have yet to detect any significant increase in demand for new lending over and above the refinancing of existing facilities,’ the bank said. ‘The availability of finance remains more constrained for smaller companies.’ The big banks said that net capital issuance may curb lending to companies for the rest of the year, the bank said.

The central bank also said yesterday that M4 money supply, the broadest measure of money in the economy, rose 12.6 per cent from a year earlier in August, the least since September 2008. On the month, it increased 0.1 per cent.