Mortgage approvals rise but housing market still stagnant
Thursday, 29 September 2011 10:13
Mortgage approvals increased in August to a 32-month high, despite being lower than normal, historical levels.
The figures suggest although mortgage lending has improved, the housing market is still flat and most analysts expect house prices to fall by five per cent over the next year.
The Bank of England has reported that lending to individuals increased by £1 billion in August. This is slightly less than the previous six month average of £1.2 billion.
The number of loans approved for mortgages in August increased by about five per cent, from 49,239 in July to 52,410 and was well up on the last six-month average of 47,551, suggesting demand for new homes is increasing.
However, this contradicts data out yesterday from the Land Registry and today from Nationwide that suggests the housing market in the UK is largely flat.
Howard Archer, Chief UK & European Economist, from IHS Global Insight said: “The fact that house prices could only edge up 0.1% in September after dropping 0.6% in August is consistent with our belief that house prices are likely to trend down gradually over the coming months in the face of persistently weak economic activity, rising unemployment and muted earnings growth.”
Lending relating to property, known as releasing equity from a property, rose by £0.6 billion, in line with the previous six-month average increase. The number of approvals for remortgaging increased from 31,279 to 34,668.
Property lending has been lower than normal over the past six months as households concentrate on repaying debt whilst interest rates are low.
Mr Archer said: “Although mortgage approvals were at a 32-month high in August, they were still substantially below the average monthly level. Consequently, there remains little evidence of any significant step up in housing market activity.”
Meanwhile, levels of borrowing for consumer credit increased by £0.5 billion, level with the previous six-month average increase. This follows last month’s figures which showed that borrowing levels had dipped to just £0.2 billion.
Credit card lending was unchanged and borrowing for other loans and advances increased by £0.5 billion.
The Land Registry reported yesterday that banks and financial institutions were struggling to borrow on the money markets and that this was likely to filter through to consumers and businesses, making borrowing conditions for households more difficult over the next six months.
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