Mortgage approvals rise 'modestly' as remortgaging falls

Mortgage approvals in May rose slightly while remortgaging hit a real low.

Data from the Bank of England out today showed total net lending to individuals in May rose £0.6 billion, lower than the April increase and the previous six-month average.

Net lending secured on homes was lower than the April increase, up £0.3 billion. The number of loans approved for house purchase was higher than in April and higher than the previous six-month average, while remortgaging was lower.

Simon Rubinsohn, Royal Institution of Chartered Surveyors (Rics) chief economist, said: "Bank of England data suggest that mortgage approvals for house purchases only rose modestly in May.

"At first glance, this appears slightly at odds with the British Banker's Association (BBA) figures published last week but a more detailed examination of numbers helps to explain the apparent inconsistency. While mortgage approvals by banks actually rose by around 2,500, loans from building societies and other specialist lenders both fell during the month.

"Remortgaging activity hit a new low in May. This may reflect, in part, a degree of satisfaction with the low standard variable rate (SVR) mortgages that many homeowners have moved on to as existing products terminate.

"It could also capture the difficulty other borrowers, who have slipped into negative equity (or now require high loan-to-value) as a result of price house declines, are facing in finding a more attractive alternative offering."

While the "modest" increase in mortgage approvals may do little to encourage green shoots in the housing market, further positive signs were seen elsewhere today. The National Association of Estate Agents (NAEA) found a third of estate agents had seen an increase of ten per cent in properties coming onto the market, compared with six months ago.

Gary Smith, president of the NAEA, said: "It is another positive indication that the UK housing market is over the worst and the NAEA calls on the government to further badger banks and building societies to respond to the opportunity to pull the situation around."