Home loans rush to beat benefit cuts

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The Independent Online

A last-minute stampede to avoid planned cuts in mortgage interest payments for the unemployed helped to swell home loan approvals by banks in August, according to figures released yesterday.

The increase in offers to 42,000, up from 29,400 in the previous month, was also 25 per cent up on the same time last year, said the British Bankers' Association.

From next month, new borrowers will not be paid the interest on their mortgage for nine months after becoming unemployed.

David Dook, assistant director at the association, said the rise in approvals may have been caused by borrowers hoping to avoid the Government's benefit cuts. "It may also be that there has been some incentive as a result of people trying to get a mortgage in advance of the withdrawal of Government benefits next month," he said.

The lending figures had also been skewed by the addition for the first time, in August, of results from Cheltenham & Gloucester, the building society recently taken over by Lloyds Bank.

The bankers' mortgage lending figures also showed that net lending in August, which excludes re-mortgages, went up to pounds 581m from pounds 382m the previous month. However, the BBA played down hopes that the long-running slump in the housing market may be coming to an end. Mr Dook said: "It would be fair to say that a reasonable proportion of the increase comes from the C&G. If we combine them with building society figures and compare them to July they do show some sort of improvement.

"Whether that is a good thing is another matter, in that July lending figures were very low compared to previous months."

Cheltenham & Gloucester yesterday refused to give details of its net mortgage lending for August. But some experts yesterday suggested that without its addition to the banks' lending figures, last month's results would have barely shown an improvement on July.

Rob Thomas, housing analyst at Swiss banking group UBS, said the figures suggested that the market was still depressed and "may be near to where it was at its lowest point in 1993." That was hardly surprising when house prices were still falling.