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Mortgage approvals increase says Bank of England

Monday, 30 March 2009 11:38 AM

The Bank of England has this morning released the mortgage approvals data for February, which showed net lending higher than in January.

Mortgage approvals for the month were up to 37,937 from 31,791 in January.

Net lending to individuals increased by £1.3 billion for the month, with the increase in net lending secured on homes at £1.5 billion; which was higher than the January increase and the previous six month average.

The number of loans approved for house purchase was also higher than in January and the six month average, up to £4.5 billion from £3.8 billion. The data has been welcomed by members of the property industry, who have said this shows the first signs of the market bottoming out, with people encouraged back into the market by low house prices and interest rates.

Andrew Montlake, director of independent mortgage broker, Coreco, said: "Following on from the British Bankers' Association figures published last week, this latest rise in mortgage approvals is an encouraging sign for the housing market.

"Because mortgage approvals happen ahead of property transactions, these figures lend credence to the claim that the bottom of the property market is fast approaching.

"With many people now looking to take advantage of low house prices and mortgage rates, the only thing that is holding them back is the banks themselves. If the government is genuinely serious about helping first-time buyers and borrowers generally, then it needs to act now and competitive, sensible lending up to 90 per cent loan-to-value is the place to start. The draconian lending criteria being adhered to by the banks have to be relaxed."

Consumer credit declined by a net £0.2 billion, falling from the £0.2 billion net increase in January, and the largest repayment of consumer debt since April 1993.

Simon Rubinsohn, Royal Institution of Chartered Surveyors (Rics), chief economist said: "The number of mortgages sanctioned in February climbed to the best level since May 2008. This reflects in no small measure the improvement in affordability in the wake of the 20 per cent drop in house prices and the sharp reduction in borrowing costs.

"Even so, accessibility to the market still remains a problem with many first-time buyers struggling to find the necessary deposit to compensate for the much reduced loan to value ratios now being offered by lenders. While it is likely that the numbers of mortgages being approved will continue to edge upwards over the coming months, the level of activity will still remain low by historical standards."

Sarah Garrod

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