Approved Mortgages Lower in January

The number of mortgages approved rose slightly during January but lending levels were still 43 per cent lower than in the same month a year ago, figures indicate today.

A total of 23,376 mortgages were approved for house purchases during the month – the highest for four months and up from 22,416 in December, the British Bankers’ Association said.

However, net mortgage lending, which excludes redemptions and repayments, fell to its second-lowest level since April 2001 at £2.9 billion in the month – nearly half that in January 2008.

The value of total mortgage advances made in January was unchanged from December at £9.9 billion.

There was also a slight increase in the number of people remortgaging, with 30,710 loans approved for people switching to a better deal during the month, up slightly from 30,500 in December but still 60 per cent lower than 12 months earlier.

There has been a steep fall in the number of people taking out a new mortgage when their current deal ends, partly because house price falls have left many people without the big equity stakes lenders now demand to get the best rates.

Historically low interest rates have also led to steep falls in lenders’ standard variable rates, which most borrowers revert to when they come to the end of a deal, meaning many homeowners are better off staying where they are.

The BBA said: “January’s approval activity, both in volume and value, was marginally above December but continued to be at a very low level.” It added that lower borrowing costs and falling property prices had “underpinned” demand for mortgages from the high street banks, which it said were providing more than two-thirds of new mortgage lending.

Howard Archer, chief UK and European economist at IHS Global Insight, said that the modest rise in approvals last month was further evidence that housing market activity may have bottomed out.

But he warned that further “significant” falls in prices were likely: “Furthermore, while latest survey evidence indicates that buyer inquiries are now picking up significantly as people are attracted by lower house prices and the Bank of England slashing interest rates, we are sceptical that this will lead to a marked rise in actual sales soon.”

Demand for unsecured credit remained subdued during January. Consumers spent £6.1 billion on their credit cards, in line with previous months. But when repayments of £6.3 billion were taken into account, outstanding credit card debt rose by £253 million – slightly up on the previous six-month average.

Borrowing through overdrafts and loans fell by £111 million in January, the third month in a row in which it has declined. There also was a steep fall in the amount of money people had saved during the month, with deposits dropping by £2.2 billion in January.

The BBA said that this partly reflected people spending their savings but was also due to them moving their money into alternative, higher yielding assets, following the reduction in deposit rates.

Category: Property News