Mortgage approvals at 15 month high

August mortgage approvals highest since May 2010, reveals the latest High street banking report from the BBA.

Related topics:  Mortgages
Millie Dyson
23rd September 2011
Mortgages
BBA statistics director, David Dooks said:

"The weak economic environment continues to undermine confidence in both household and business sectors, which impacts on borrowing demand.

“The banks' new mortgage lending has ticked up in the past couple of months with higher buy-to-let demand, and some business sectors are edging towards year-on-year borrowing growth, although the general landscape is one of households not wanting to take on more borrowing and businesses waiting for trading conditions to improve before borrowing to expand or invest.

"Against this backdrop, paying down existing debt dominates the net lending figures.”

Annual growth rates

Annual growth of the banks’ net mortgage lending was 1.6% in August, remaining ahead of the 0.8% for the whole mortgage market in July.

Unsecured credit contracted by 1.2% over the past year and personal deposits rose by 3.8%. In the first eight months of 2011 deposits and savings have increased by only £11.0bn compared with £18.6bn in the same period of 2010.

Mortgage lending

Gross mortgage lending of £8.2bn in August was stronger than July and 3% higher than in August 2010.

The slight turn up in recent months in both house purchase and remortgaging
approvals led to gross mortgage lending being stronger in August but as repayments continued at a high level, net mortgage lending increased by just £0.7bn in August.

Number of approvals

House purchase approvals were higher than in July and 14% higher than in August 2010. The average value (£145,500) was 1% higher than a year earlier.

Reports suggest that mortgage activity may have been stimulated by some growth in the buy-to-let market. The number of remortgage approvals in August was higher than in July and 10% higher than August 2010.

Approvals for other secured lending continue to be stable, as homeowners use the historic appreciation in the value of their homes as security for borrowing.

Unsecured lending annual growth rates

Retail sales were flat in August and consequent demand from consumers for unsecured borrowing remains weak.

Repayment of loan and overdraft borrowing continues to outweigh ne
lending. Borrowing on cards has expanded, but only slowly over the past two years (and largely relates to the interest added to accounts, because monthly spending is regularly more than offset by repayments).

Business borrowing annual growth rates

In the non-financial business sector, new borrowing continued to be largely exceeded by debt repayment in August, as overall demand remained weak.

From January 2011 definitional changes to categories led to some series breaks. For comparative purposes, ‘property related’ covers real estate activities & building development, ‘construction’ covers all construction activities except building development.

Jonathan Samuels, CEO of Dragonfly Property Finance, comments:
 
"There has been a phenomenal rise in the number of buy to let investors over the past six or so months. Soaring rents are proving irresistible to many landlords, who are returning to the market in their droves.
 
"In a growing number of cases, we are seeing landlords refinance their existing portfolios to acquire new properties.
 
"They see an opportunity to maximise returns through increasing their portfolios and are taking it. With prices so low and rents so high, yields are exceptional right now.
 
"While demand for mortgages among owner occupiers remains fairly weak, there is a real resurgence in demand among landlords."
More like this
Latest from Property Reporter
Latest from Protection Reporter
CLOSE
Subscribe
to our newsletter

Join a community of over 30,000 intermediaries and keep up-to-date with industry news and upcoming events via our newsletter.