Savings and mortgage approvals rise

Thursday, 23 July 2009 10:30

Brits are saving more while bank mortgage approvals are also on the rise.

Data from the British Bankers' Association (BBA) show June saw a "substantial increase" in saving. Personal savings deposits rose £3.2 billion in June - compared to £0.3 billion in May.

The rise in saving heading to banks contrasts with data yesterday from National Savings & Investments that showed savers are now stepping back from a flight to safety and looking again to get the best possible returns in the current low interest environment.

The BBA stated is was hard to state why there was such a spike in savings at the banks, but looking back over previous increases it could be due to a number of more competitive deals hitting the markets, encouraging savers from building societies and other providers.

The BBA data also show an upturn in mortgage approvals for house purchases at high street banks.

Approvals for home buyers were up 64.7 per cent on a year ago and 10.4 per cent on May to 31,919.

The average approval for house purchase was £136,400 - compared to £152,800 a year before.

However, the average size of mortgage approvals has grown 14.4 per cent since January, suggesting lenders are starting to open up to higher loan-to-value levels. Remortgage approvals, meanwhile, continued their decline - down 51.8 per cent on a year ago to 28.133 deals approved - as homeowners seems more content to stick on low standard variable rate deals than lock into higher rates.

The BBA stated remortgage lending was now starting to stabilise.

BBA statistics director, David Dooks, said: "Numbers of new home loans approved by the high street banks are recovering from the very low level last November and so far this year, gross mortgage lending has topped £50 billion.

"After repayments and redemptions, the banks' net rise in mortgage lending of £18bn in the first six months is in sharp contrast to lending by the rest of the market, which is still contracting."

He stated people were showing little appetite for unsecured borrowing and are generally keeping more money in their accounts. New personal loan lending is down 38.7 per cent on a year ago.

Andrew Montlake, at mortgage broker Coreco, said he was unconvinced by suggestions the mortgage market is starting to pick up.

"Some recent mortgage figures, including today's, have led some to suggest things are finally beginning to pick up, but I don't buy it," he said. "From where I'm standing, the next few months are still going to be exceptionally difficult for borrowers and this will only change once the lenders begin to lend - and they're still not lending at levels sufficient to drive a sustained recovery in the property market."

A spokesperson for the BBA explained the rise in mortgage lending at the larger banks was in part due to the fact smaller lenders and some building societies have stepped away from the market over the last year.

"These statistics also show confidence is returning the housing market," he said.

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