Hopes rise with the number of new mortgages highest for 16 months

Published on Thursday 23 July 2009 22:02

FRESH hopes of economic recovery emerged yesterday with figures showing that the number of new mortgages had hit the highest level for 16 months.

A total of 35,235 new home-purchase loans were granted in June, according to data from the British Bankers Association (BBA) – up 64.7 per cent on a year earlier. The value of the loans was up 2.6 billion on the previous month, taking it back to levels last seen in March 2008.

In addition, 28,133 householders renegotiated their mortgages in June. This was up almost 2,500 on the previous month.

The BBA said: "The number of house purchase approvals and their average value has risen steadily in the last six months, reflecting some improvement in lenders' ability to lend."

But it admitted the changes in mortgages were only "modest increases" in borrowing, and had taken place alongside an increase in the amount of cash being deposited in savings accounts and a continued reluctance of shoppers to rely on credit cards.

Predictions last month from the National Institute for Economic and Social Research that the recession may have ended in April were subsequently revised, while Chancellor Alistair Darling is sticking with Treasury predictions that the downturn will not end until late 2009.

David Dooks, the BBA's statistics director, said: "Numbers of new home loans approved by the high-street banks are recovering from the very low level last November, and so far this year gross mortgage lending has topped 50 billion.

"After repayments and redemptions, the banks' net rise in mortgage lending of 18bn in the first six months is in contrast to lending by the rest of the market, which is still contracting.

"People are showing little appetite for unsecured borrowing and are generally keeping more money in their accounts."

IHS Global Insight economist Howard Archer said the mortgage figures gave some hope that the property market was bottoming out.

However, he warned that many firms were still struggling to obtain credit – and suggested that the Bank of England might yet have to extend its 150bn programme of quantitative easing, which injects fresh funds into the money markets.

He said: "Credit conditions remain very tight and a potential significant obstacle to recovery prospects."

Other figures published yesterday, by the Office for National Statistics, showed high-street spending rose in June.

Summer clothes sales were believed to be behind a 1.2 per cent month-on-month rise in volumes. But household goods stores have seen 12 successive months of decline, as a weaker property market bears down on trading.

Stephen Robertson, director general of the British Retail Consortium, said: "June's retail sales were boosted by sunshine, promotions and discounts. But the wholesale turnaround in consumer confidence retailers are looking for remains elusive."

BUILDING UP

HOUSING experts yesterday declared Scotland's property market is showing growing signs of stabilising – despite applications to start new homes from builders slumping 43 per cent in the past year.

Latest figures from the National Housing Building Council (NHBC) show that 1,735 applications were received for the most recent quarter, down 4 per cent from the previous quarter.

But the industry body has pointed out the latest figure is 11 per cent higher than the previous quarter and 20 per cent up on the one before that.

Malcolm MacLeod, the NHBC's director for Scotland, said: "House-building production in Scotland appears to be showing signs of stabilisation, particularly in the private sector.

"Output is still greatly reduced compared with previous years. Improving liquidity in the mortgage market and, in particular, the relaxation of strict lending terms, is a key to attracting buyers back into the market and ensuring a sustainable recovery."

Of the 1,735 applications to start new homes during the three months to the end of June, 1,271 were related to private sector housing.

The number of applications was down 66 per cent in Edinburgh and 62 per cent in Glasgow compared with the same quarter in 2008.