BBA: Mortgage approvals grow 4%

The number of mortgage approvals increased around 4% on a monthly and yearly basis in July to 74,590, as gross mortgage lending remained flat for a third consecutive month at £7.6bn, the British Bankers’ Association (BBA)reports.

Its figures, representing two-thirds of UK mortgage lending by the big high street banking groups, showed that gross mortgage lending was down 8% year-on-year from £8.3bn in July 2010.

Annual net mortgage lending grew 1.7% in July to £0.9bn up from £0.5bn in June, ahead of the increase of 0.7% for the whole mortgage market, the BBA said. Yet, net mortgage lending was down from £1.3bn in July 2010.

While house purchase and remortgage approvals remained weak in July, both showed growth on a monthly and yearly basis, with total approvals up around 4% on June and July 2010.

House purchase approvals reached a 12-month high of 33,417, up from 32,123 in June and modestly up on July 2010. The average value of approvals was 2% higher than July last year at £151,500.

Remortgage approvals in July rose 14% on last year to 26,043 and up from 24,311 in June, which could be a result of the growth in the buy-to-let sector, the BBA said.

Meanwhile, approvals for equity withdrawal remained flat, the BBA reported, with homeowners using the rise in value of their homes as security for borrowing.

David Dooks, statistics director at the BBA, said: "Demand for borrowing from both households and companies continue to be weak reflecting the slow growth in the economy."

Brian Murphy, head of lending at Mortgage Advice Bureau, noted that July's approval figures reflect applications made before the summer holiday period and said a stronger indicator of the state of the market will come from September and October figures.

He said: "In a healthy market, we would expect to see an uplift in numbers post summer vacations, but whether this will happen is anybody's guess.

"The problem doesn't lie with the lending environment, which is highly attractive at the moment. The problem lies with consumers feeling the financial pinch.

"With household bills escalating as food and energy prices continue to rise, this higher general cost of living is putting a squeeze on the amount of spare cash families have at the end of every month to put away in a house deposit fund.

"As a result, rather than new borrowers taking advantage of the low interest rate environment, it's existing homeowners taking the opportunity to pay down their mortgages."