Mortgage approvals soar by 81% year-on-year

Number of mortgages approved increases significantly but gross lending is down a third, BBA figures show

• Sandra Haurant
• guardian.co.uk, Wednesday 23 September 2009 11.14 BST
• Article history

Homeowners have found it increasingly difficult to remortgage. Photograph: David Sillitoe

The number of mortgages approved by banks for house purchases remained steady in August but was up 81% on the same month last year, figures from the British Bankers' Association (BBA) showed today.

A total of 38,095 mortgages were approved for homebuyers in August, broadly in line with July's figure but markedly higher than the 21,001 approved last August when lending dipped to an all-time low. The figure was also higher than the previous six-month average of 32,016, suggesting banks are making more credit available to buyers.

The value of the average mortgage approved for purchase was £134,500, an increase of 3.2% compared with the same month last year.

Meanwhile net lending, which takes into account redemptions and repayments, rose by 46% month-on-month to £2.8bn following a dip to £1.9bn in July. The increase brought lending back in line with the previous six-month average of £2.7bn and represented annual growth of 4.6%.

Gross mortgage lending in August was £8.6bn, in line with previous months but down 33% compared with a year earlier. A key driver for the fall has been a slow down in remortgaging as borrowers have been unable to switch deals or decided they are better off paying their lenders' standard variable rate.

The number of remortgages was down 47% year-on-year at 26,124. This compares to a six-month average of 30,414.

BBA statistics director, David Dooks, said: "The main high street banks' mortgage lending has stabilised in a market where other lenders are largely inactive.

"Loans approved for house purchase have recovered to early-2008 levels, but low levels of customer demand and a limited number of properties coming on to the market will continue to moderate lending."

Andrew Montlake, director of independent mortgage broker Coreco, said the figures suggested a level of "stability" in the market and gave the impression the "worst of the storm is now behind us".

"However, this is likely to be a long, slow recovery due to a lack of readily available housing stock and mortgage lenders' continuing insistence on borrowers with high deposits or significant equity. First-time buyers and borrowers with small deposits are still finding it very difficult to secure mortgage finance," he added.

The BBA also reported that consumer credit had continued to contract as households opted not to take on more debt. Repayments on credit cards outstripped borrowing, with £5.8bn repaid and £5.6bn borrowed on plastic. Borrowing through personal loans and overdrafts was also static at £1.3bn, the same as the previous month and down slightly on the six-month average of £1.4bn.

This represented a drop of 37% compared with borrowing levels in the same month last year. Dooks said: "In reaction to the economic conditions, consumers appear to be building up their savings and controlling their appetite for unsecured borrowing."