Mortgage Lending Increases! |
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25th August 2009
The number of mortgages approved for house purchases by the major High Street banks has risen to a 17-month high, figures show.
The British Bankers' Association (BBA) said approvals in July stood at 38,181, a rise of 7.4% compared with June and 77% higher than a year ago. The data suggests the rise in activity and prices could stretch into autumn, which is borne out by our own figures.
However, the BBA warned that new lending was below seasonal expectations despite greater demand from borrowers. The truth is that seasonal trends have to be forgotten as we are in new, uncharted territory, nevertheless, some things remain constant - Summer Holiday and Kids off school.
The number of loans approved for people buying a home in July was at its highest since February 2008. Banks had been more forthcoming in mortgages available to potential buyers, with the average amount borrowed at £139,700 in July.
However, the BBA's statistics director David Dooks said that banks were still being "more realistic" about how they should lend to compared with when the property boom was at its peak. frankly, this is a victory for common sense as the availability of money in a rising market fueled unsustainable price rises, particularly as lenders appeared intent on gaining market share.
He said the ability of potential buyers to pay a deposit and long-term sustainability were key issues when banks decided whether to offer a mortgage. Property prices would also "stall" for some time.
"It is a different marketplace to where we have been in the past," he said.
The difference between the costs for mortgage lenders and the amount of interest they charge for fixed-rate home loans continues to grow, according to financial information service Moneyfacts.
It said that institutions were looking to repair their balance sheets after the banking crisis by failing to reduce mortgage costs despite the fall in swap rates, which are the guide prices used by lenders on long-term loans.
The margin between the rate for average two-year fixed-rate mortgage - 5.18% - and the two-year swap rate - 2.04% - stood at 3.14%, the highest on record, Moneyfacts said. "Normal rules where lenders pass or decrease rates based on the cost of funding seem to have well and truly gone out of the window," said its spokeswoman Michelle Slade. This smacks of recouping losses at the expense of customers.
Nevertheless, this remains good news and underpins what we all know - thinks are getting better. The market seems to undulate at the moment, but the average trend is up. We will see a slowdown reported in August and I am sure the press will see that as proof that the market is stalling. In reality, its the summer holidays, and it happens every year.
