Home loan approvals at two-year high

The number of mortgages approved for people buying a home jumped to its highest level for more than two years during December, figures showed today.

A total of 45,897 loans were approved for house purchase during the month, double the number seen 12 months earlier and the highest figure since September 2007, according to the British Bankers' Association.

In a further sign that the housing market is continuing to recover, total mortgage advances rose by 6 per cent during the month to reach £10.2 billion, a level last seen in November 2008.

The group credited the jump, which came during a month when the mortgage market traditionally slows down, on people rushing to complete house purchases before the Government's stamp duty holiday on properties costing up to £175,000 ended at the beginning of this year.

But unsecured lending remained subdued in December and, while savings levels bounced back during the month, they remained weak for 2009 as a whole, as consumers instead focused on paying down their debt.

David Dooks, BBA statistics director, said: "The high street banks continued to lend substantial amounts in the weaker mortgage market of 2009, approving more than 440,000 loans for house purchase.

"Their share of gross lending went up from a historical level of about two-thirds to three-quarters, due to specialist lenders largely withdrawing from the market and building society finance contracting."

But despite expanding their market share, the major banks advanced a total of just £107 billion in 2009, down from gross lending of £170 billion in 2008 and £221 billion in 2007.

Approvals for all lending totalled 980,000 during the year, 27 per cent down on the previous year and the lowest figure since records in this format began in September 1997.

Despite the pick-up in house purchase activity, the number of people remortgaging remained subdued during December at 23,480, as low interest rates meant many people were better off staying on their lender's standard variable rate when their existing deal came to an end.

Repayments on credit cards continued to outstrip new spending in December, at £5.9 billion, compared with spending of £5.8 billion.

But once interest and charges were taken into account, outstanding credit card debt rose by £130 million.

Overall, new spending on credit cards during 2009 was nearly 10 per cent down on 2008, while repayments fell by 9 per cent but, due to the impact of interest, outstanding debt still rose by 8.8 per cent during the year.

Demand for personal loans and overdrafts continued to be weak in December, contracting by £475 million, the 13th consecutive month during which consumers have repaid more than they borrowed.

The amount owed through loans fell by £3.9 billion during 2009, while all consumer credit contracted by 2.2 per cent.

Savings levels increased by £3.6 billion during the final month of the year, following a weak November during which people set aside only £1.4 billion.

But new deposits for the whole of 2009 of £23 billion, were down on levels of £25 billion and £28 billion for 2008 and 2007 respectively, as people used their spare cash to repay debts.