Home buyer mortgage approvals at early 2008 levels

Tuesday, 23 June 2009 10:55

Mortgage approvals are rising to levels last seen in early 2008, new data shows.

While much suspicion still remains about the underlying health of the property market, spring 2009 has seen more interest from buyers - despite first-time buyers being tethered by demands for high deposits.

The British Bankers Association (BBA) today issued data for May showing £4.0 billion worth of mortgages approved for home purchases - down just 1.5 per cent on a year ago.

However, the mortgage market remains anaemic - with the level of all mortgages approved down 43.8 per cent.

This is due to homeowners refusing to remortgage while they sit on low standard variable rates - despite warnings fixed rates are now rising and when SVRs start to rise best fixes could be out of reach.

May saw 24,847 remortgage deals approved - down 60.2 per cent on a year ago - while there were 31,162 house purchase deals approved, a rise of 15.8 per cent.

Andrew Montlake, director, independent mortgage broker Coreco, said: "It does appear at least after a traumatic 18 months that some level of balance has returned to the market.

"However, it would be a dangerous game to read too much into these latest figures."

He added: "The real worry is that many people are in a precarious position, where even a small base rate rise in the coming months could easily tip the balance.

"Lenders have already increased their fixed rates dramatically and the advice is to fix now before they increase further."

BBA statistics director, David Dooks, said high street banks were opening up lending, but demand was weak.

"Unlike much of the mortgage market, the high street banks are still seeing lending growth and improved mortgage availability is reflected in higher average loan approval values," he said.

"Consumers' borrowing appetite remains weak, reflecting uncertainty over household circumstances, so credit growth is negligible and spending activity on credit cards is down on this time last year."

This matched finding from the Council of Mortgage Lenders yesterday that while major lenders had promised to increase mortgage lending this year, this is "unlikely to fully off-set the loss of capacity elsewhere" as smaller and specialist firms drop out the market.

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