Mortgage approval numbers up - what do Huddersfield agents think?

Jun 4 2009 by Roy Wright, Huddersfield Daily Examiner

THE number of loans approved to home buyers rose for the third month running in April, latest figures have revealed.

A total of 43,201 loans were approved for house purchases during the month, the highest level since April last year, according to the Bank of England.

There was also a slight pick up in net lending, which strips out redemptions and repayments, following a steep fall in March.

The figures emerged as Huddersfield estate agents reported growing stability in the local housing market – with increased viewings and valuation work and more offers being made.

The Bank of England said new mortgage lending increased by £973m during April – up from £640m in March, but still below the recent six-month average of £1.1bn.

But total mortgage advances slipped to just £10.89bn, their lowest level since December 2000, reflecting ongoing weak re-mortgaging activity.

The number of new loans approved for people re-mortgaging also continued to slide – dropping to 31,800 from the recent average of 41,054 – as people opted to stay on their lender’s standard variable rate when their existing deal ended, rather than switch to a new mortgage.

The 8% jump in mortgage approvals for people buying a new home adds to growing evidence that activity in the housing market has now passed its worst.

It follows figures from the Land Registry which showed that the rate at which house prices are falling may be moderating – with the average home in England and Wales losing 0.3% of its value during April, the smallest drop for more than a year.

Nationwide has also reported a 1.2% jump in UK house prices in May, the second increase in three months, while property intelligence group Hometrack also said they remained unchanged during the month.

Despite the run of positive data on the housing market, economists remain cautious about the prospects of a recovery.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “The further rise in mortgage approvals from last November’s record lows reported by the Bank of England ties in with now widespread evidence that housing market activity is trending up modestly.”

But he said the increase had to be put in perspective, with approvals for house purchase still 22% lower than they were a year ago and less than half the average level of 98,000 a month seen between 1993 and 2007.

He said: “Despite the recent limited pick-up, mortgage activity is still down at a level that is consistent with falling house prices.”

Vicky Redwood, UK economist at Capital Economics, said: “April’s household borrowing figures provide further evidence that housing market activity is gradually strengthening, but the big picture is that it remains extremely subdued.

“The latest rise in house prices looks more likely to reflect monthly volatility than the start of a sustained upturn.”

The Bank of England said that unsecured lending rose by £314m in April – the biggest rise since December – but still below the recent six-month average.

Outstanding borrowing on loans and overdrafts fell by £29m, but credit card debt jumped by £343m to £51.13bn.