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Mortgage approvals rise yet net lending falls

Friday, 1 May 2009 11:53 AM

The Bank of England lending figures for March, released today, found mortgage approvals had risen for the fourth successive month.

However, net mortgage lending fell to £0.8 billion, from £1.4 billion in February, and industry experts are warning the housing market may not be 'bottoming out' just yet.

The number of loans approved for purchase stood at 39,230, according to the Bank of England, higher than the previous six-month average, with remortgaging approvals also rising in March.

Despite, the increased number of loans approved, the figures on an annual basis were still pretty grim, down 33.5 per cent on March last year.

Simon Rubinsohn, Royal Institution of Chartered Surveyors (Rics) chief economist, said: "Further evidence that activity in the housing market is continuing to pick-up, albeit from abysmally low levels, was provided today.

"This level of transactions is, however, still way below what would normally be expected in a recession.

"Even if, as we expect, activity levels continue to rise, the number of mortgage approvals is unlikely to climb above 60,000 by the year end which will still leave them at only around half the level of the recent high water mark."

The increase in total net lending to individuals in March was lower than the February increase and below the previous six-month average, with the yearly growth rate continuing to fall, by 0.4 per cent to 2.2 per cent.

Council of Mortgage Lenders (CML) head of research, Bob Pannell, said: "The good news is that a positive net lending outturn in the first quarter makes our £25 billion negative net lending forecast for the year look pessimistic. We anticipate revising this forecast over the next couple of months.

"But prospects remain subdued. Realistically, the most reasonable expectation is for a period of lending that stabilises but 'bumps along the bottom' at relatively low levels for some considerable time."

"At the moment, trying to accurately predict where the housing market will go next is a little like herding cats. While we have seen mortgage approvals rise for the second month running, leading to renewed hope that we might be seeing the early signs of a recovery, talk of a full-blown recovery is still premature," Andrew Montlake, director of independent mortgage broker Coreco, added.

Building societies have also seen an increase in mortgage approvals for March, from £742 million in February to £1,542 million in March.

The Building Societies Association (BSA) discovered gross lending amounted to £1,462 million in March, compared to £3,633 million for the month last year, in their research released today.

Adrian Coles, director-general of the BSA said: "As might be expected at this time of year, mortgage approvals in March rose sharply.

"Even adjusting for seasonal influences this is the highest figure since November. Although this may suggest a very slight recovery in activity in the housing market over the next few months the environment nevertheless remains very challenging."

Sarah Garrod

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