Mortgage approvals increase to 14-month high
The squeeze on mortgage borrowers is easing, according to lending figures released yesterday by the Bank of England. Approvals for home purchases in July numbered 49,239, up from 48,500 in June. Approvals are now at their highest level since May 2010 as building societies and banks continue to increase their lending to prospective home buyers.
However, mortgage lending remains at around half the levels seen in the years before the 2008 financial crash. "It's difficult to get too excited about the pick-up in mortgage approvals," Andrew Goodwin, the senior economic adviser to the Ernst & Young Item Club, said. "Although this might have been a 14-month high, it's still very low in a historical context and the market remains essentially stagnant."
Such a pessimistic view is supported by new research from Oxford Economics, commissioned by the National Housing Federation (NHF), which projects that home ownership levels will fall to 63.8 per cent over the next decade as banks continue to demand large deposits from first-time-buyers and high prices exclude most young people from the market.
Oxford Economics also found that lenders' attitudes to borrowers are hardening in some regions – particularly the North of England – which have poor economic prospects.
David Orr, the chief executive of the NHF, which represents housing associations, said: "Home ownership is increasingly becoming the preserve of the wealthy and, in parts of the country like London, the very wealthy. And for the millions locked out of the property market, the options are becoming increasingly limited as demand sends rents rising sharply and social homes waiting lists remain at record levels."
The Housing minister, Grant Shapps, admitted in response to the report that "we have not been building enough homes" and reiterated the Government's pledge to increase the supply of affordable new houses in England by 170,000 over the next four years. Yet some analysts argue that the number of new homes required to meet demand is considerably higher. The Home Builders Federation says fewer homes are being built in England than at any time since the 1920s.
Other figures from the Bank of England yesterday show that total levels of outstanding consumer credit fell in July to £209.4bn, down 12 per cent from the peak of £236.8bn in September 2008. Net consumer credit increased by £200m in July, down from £400m in June. Credit card lending rose by just £259m, while borrowers repaid £54m of other loans and advances. While paying off debt can be a sensible move by individuals, the concern is that if people do so simultaneously, overall consumer demand in the economy will collapse.
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