UK mortgage approvals up 81.4% in Aug

Source : Business Times – 24 Sep 2009

But consumer credit and demand for re-mortgaging remains subdued

British banks approved 81.4 per cent more home purchase loans in August than the same month a year ago but consumer credit and demand for re-mortgaging remained subdued, a survey showed yesterday.

The British Bankers’ Association (BBA) said that 38,095 mortgage applications were approved last month.

That was similar to the 38,186 approved in July but significantly higher than August 2008 when activity in the housing market had almost ground to a halt.

The figures chime with other surveys showing that record low interest rates have helped stabilise Britain’s housing market after sharp price declines last year.

However, BBA director of statistics David Dooks noted that the big banks had picked up market share from smaller lenders and the broader picture may not be so robust.

‘The main high street banks’ mortgage lending has stabilised in a market where other lenders are largely inactive,’ he said.

‘Loans approved for house purchase have recovered to early-2008 levels, but low levels of customer demand and a limited number of properties coming onto the market will continue to moderate lending.’

There was evidence that consumers were building up savings.

Personal deposits rose by a net £3.3 billion (S$7.6 billion) in August, up 3.7 per cent on a year ago, while consumer credit contracted by 0.6 per cent year-on-year.

Demand for re-mortgaging continued to fall, and gross mortgage lending was a third lower than at the same time last year.

Still, analysts said that the recovery in mortgage approvals, a lead indicator of housing demand, provided further evidence that record low interest rates were tempting buyers back to the market.

Although still low by historical standards, mortgage approvals have more than doubled from record lows hit last November.

‘Funding conditions and buyers’ confidence are improving as the housing market stabilises,’ said Amit Kara, UK economist at UBS.

House prices in Britain fell by as much as a fifth during 2008 but appear to have picked up in recent months.

A survey by Reuters earlier this month showed that most analysts think that property prices have bottomed out but predict that a return to growth will be slow as supply gradually increases.