Mortgage lending doubled in December

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The Independent Online

Mortgage lending doubled during December but the figure was only a quarter of the level seen 12 months early, the Bank of England said today.

Net lending, which strips out redemptions and repayments, was £1.9 billion during the month, up from November's depressed level of £834 million.

But the figure was still well down on lending levels in December 2007, when net lending totalled £7.72 billion.

The number of mortgages approved for house purchase also increased after hitting a new record low in November, with 31,000 loans in the pipeline - up from 27,000 during the previous month.









But although the number of mortgages approved for people moving home increased, the value of all loans approved fell to £8.72bn, the lowest level since December 1999.

The fall was driven by a steep drop in the number of people remortgaging, with approvals for people switching to a new deal declining to 36,000, compared with 41,000 in November and a recent six month average of 66,000.



The figures are in line with those reported by the British Bankers' Association earlier this week, which showed a 27 per cent jump in the number of mortgages approved for house purchase, although this was also off a record low base.



The group cautioned against reading too much into the figures, saying the increase was likely to reflect delayed activity from November, when interest rates were cut by 1.5 per cent.



Vicky Redwood, UK economist at Capital Economics, said: "December's rise in mortgage approvals might be a sign that the rise in new buyer interest seen over the past few months is finally boosting housing market activity.



"But we wouldn't get too excited. For a start, the rise from 27,000 to 31,000 simply reversed November's drop - approvals are still 76 per cent down on their peak.



"Meanwhile, we find it hard to see approvals picking up significantly further when credit is still so hard to get."



Howard Archer, chief UK and European economist at Global Insight, pointed out that although net lending rose to a five-month high during December, it was still down by 75.3 per cent on the same month of 2007.



He said: "So while the data may be a sign that banks are gradually becoming more prepared to lend, mortgage lending levels are still very weak."



He added that although mortgage approvals had risen "modestly" and were slightly above expectations, the figure followed a "particularly dismal performance" in November.



He said: "At this stage, we would infer no more than mortgage activity may be stabilising at an extremely low level."

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