Home loan approvals 'to dip in August'

The value of new home loans approved for buyers in August is likely to be less than the previous month, the Council of Mortgage Lenders (CML) predicts.

The CML estimates gross mortgage lending totalled £12.6bn in August, less than the revised total of £14.5bn in July.

But the trade body for banks and building societies says that the decline was to be expected due to seasonal factors and that lending levels had actually stabilised during the summer.

In July, CML data showed it was the first month since the boom in the housing market started to fizzle out more than two years ago that the number and value of new mortgage loans grew.

CML economist Paul Samter says that with signs of a recovery in wholesale funding markets, there are hopes of a gradual easing in constraints on the supply of funding.

But he suggests a "significant pick-up" in lending is unlikely.

"Demand from consumers and a prudent approach to lending criteria are likely to mean that the market remains subdued," he adds.

Despite the August dip, Andrew Montlake, a director at independent mortgage broker, Coreco, believes the residential market is "very slowly returning to normality" with increasingly affordable products becoming available.

"The August decline in mortgage lending was always on the cards, so this is by no means a setback," he says.

But he points out that there is still a dearth of products at higher LTVs and he believes this will continue to act as a drag on the property market, with a full recovery unlikely before late next year or even 2011.