Commenting on the BBA figures showing lending by banks, Capital & Economics said: “With little tangible evidence that the tightening in lending criteria is being reversed, we do not expect the recovery to gather much momentum over the coming months.”
In seasonally adjusted terms, a total of 87,290 new mortgages were approved in July, a rise of 4% from the previous month. These mortgages had a combined value of £9.7 billion, 9% higher than in June. In both value and volume terms, however, total new mortgages were 17% lower than a year earlier.
Within the total, there were 30,600 approvals for remortgage, an 8% rise from the previous month. That was the second consecutive monthly rise, providing tentative evidence that remortgaging activity has reached its floor. Yet it is still almost 45% lower than a year ago. Meanwhile, the number of mortgage approvals for new house purchase rose from 35,564 in June to 38,181 in July.
Capital Economics said: “Since reaching their low in November, mortgage approvals for house purchase have struggled to rise by more than 3,000 per month. The slow pace at which approvals are recovering, and the extremely low base from which they are rising, means that although the latest increase takes them to their highest level since February 2008, this is still some 40% lower than in July 2007, just before the credit crunch took hold.
“We doubt that the recovery in activity will gather much speed. Indeed, although buyer interest has been strengthening, the number of active buyers in the market remains low by the standard of recent years. As long as unemployment is still rising and pay freezes are widespread, we see little scope for buyer numbers to pick up sharply.
“What’s more, the weak economic outlook means that there is little incentive for lenders to relax lending criteria. Accordingly, the lack of mortgage finance will remain a significant obstacle to many potential buyers. Ultimately then, while housing market activity is likely to continue rising, it will only do so at a sluggish pace.”
