News: Latest mortgage lending figures lacklustre

Thu, 30 Jun 11

The number of mortgages approved for house purchase rose to 45,940 in May, a tiny 1% increase on April’s four-month low figure of 45,447, the Bank of England has reported.

But May’s figure was slightly lower than the previous six-month average of 45,957, was under March’s figure of 47,345 and was below the forecast of 46,100. It was also 7% lower year on year.

Meanwhile this morning Nationwide reported that house prices have stayed static over the last month.

Robert Gardner, Nationwide's chief economist said that the property market had 'moved sideways' over the last six months, with housing demand subdued and mortgage applications at weak levels.

The figures have left industry figures feeling as depressed as the data itself.

Brian Murphy, head of lending at the Mortgage Advice Bureau, said that after April’s bank holidays surfeit, which cut trading days, more could have been expected.

He said: “The slight increase in May underlines just how weak the mortgage market still is.

“A raft of insolvencies data over the past week and reports confirming that even the slightest rise in rates would tip many home owners over the edge, add to the feeling that a rise in bank rate is now unlikely to happen this year. Consequently, the re-mortgage market looks set to remain fairly flat as people bank on rates staying put.

“The UK economy is still very much in intensive care, while the property market, with the exception of London, is falling further into the red. Throw in the ongoing drama that is Greece and it’s no surprise that prospective buyers are ultra-cautious.”

Nick Hopkinson, director of property investment firm PPR Estates, said: “It’s clear that there has been no spring bounce in the UK housing market this year, with new loan approvals for home purchases actually less in May than they were in February in the depths of winter.

“Even at the height of summer the overall UK property market remains frozen at winter transaction levels as sellers, lenders and borrowers are all scared off.

“As an active landlord, it’s been clear to me for some time that there are many thousands of home owners who are hanging on to their homes by a thread as they struggle with increasing inflation and falling household incomes, even though interest rates remain at historic lows.

“Recent admissions by senior bankers that they have been allowing people to move to interest-only mortgages on a large scale to keep repossessions artificially low confirms what many property experts suspected.

“Unfortunately, this strategy will only make the inevitable interest rate time bomb much worse for both the banks, the individuals concerned and confidence in the overall market when interest costs have to increase.  

“With austerity measures getting into full swing, retailers failing daily and consumer sentiment on the floor, it can only be a matter of time before the real value of many people’s homes is exposed as much lower than they might wish to think, regardless of what happens to interest rates.”

The Bank of England also reported that approvals for re-mortgaging (28,759) also increased in May but were lower than the previous six-month averages (32,164).

Source: IntroducerToday.co.uk

See also: Home Asking Price Index, Mortgages

Back to: News Index