Number of home loans doubles in a year

The number of mortgages approved for house purchase has more than doubled during the past year as the property market continues to recover, figures showed today.

A total of 60,518 loans for people buying a new home were in the pipeline during November, the highest level since March 2008 and more than double the record low of 27,162 seen in November of that year.

Net lending, which strips out redemptions and repayments, also increased for the third month in a row to stand at £1.46 billion, a level last seen in February, according to the Bank of England.

The improvement in mortgage lending has been driven by increased activity on the housing front, as recent price rises tempt both buyers and sellers back to the market.

Hetal Mehta, senior economic adviser to the Ernst & Young ITEM Club, said: "An acceleration in mortgage approvals and higher mortgage lending bodes well for housing market prospects, but it is unlikely to be sufficient to sustain the rapid price increases seen over the second half of 2009.

"Supply pressures are likely to abate as the price increases encourage more people to put their properties on the market, and with unemployment continuing to rise, demand will remain weak."

But unsecured lending contracted for the fifth month in a row as consumers continued to focus on paying down their debts.

People repaid £376 million more of unsecured debt than they borrowed during November, slightly down on October's net repayment of £591 million, but nearly double the level seen during the past six months.

Within the total, credit card borrowing increased by £215 million, but this was offset by net repayments of £591 million on personal loans and overdrafts.

Consumers collectively repaid £7.85 billion of loan and overdraft debt during the 12 months to the end of November.

The Bank of England also reported that the number of people remortgaging remained broadly unchanged during November at 24,897, although this was still down on the recent six-month average of just over 29,000 as homeowners continued to sit tight.

Meanwhile, figures from the Building Societies Association showed that mortgage lending by mutuals contracted for the 11th month in a row during November.

Building society mortgage customers repaid £543 million more than they borrowed during the month.

The sector also suffered on the savings front, with customers withdrawing £775 million more than they deposited, the ninth consecutive month this has happened.

Adrian Coles, director general of the BSA, warned that mortgage lending was likely to remain "relatively depressed" during 2010 until funding conditions for lenders improved further and more homes came on to the market.

On savings, he said building societies and other deposit takers continued to face heightened competition from institutions with a Government guarantee, which was distorting the savings market.