Mortgage approvals hit highest level for 13 months

Mortgage approvals by the main high-street banks rose by an annual rate of almost 16 per cent last month, touching a 13-month high, according to the British Bankers' Association.

The BBA said a total of 31,162 loans were approved for house purchases, suggesting a more stable outlook for the depressed housing market. The average value of the loans, although below the levels seen last year, has also risen steadily over the last six months.

The market remains subdued, however. Despite rising approvals, net new mortgage lending grew by £2.3bn – the weakest monthly rate of growth since early 2001. The figure, which tempers the picture painted by the data on approvals, compares with a £2.5bn rise in April, and an average rise of £3.2bn over the previous six months. Gross mortgage lending, at £7.7bn, dropped to its lowest level since February 2001.

The data on rising approvals chimes with recent reports from the Bank of England, which said earlier this month that more house-purchase loans were approved in April than in March, and from the Royal Institution of Chartered Surveyors, which said that new buyer enquiries had risen for the seventh consecutive month in May, adding to evidence of a pick-up in housing market activity, albeit from historically low levels.

The BBA also published statistics on lending to companies, with the figures showing that loans to certain sectors remained weak. Lending to the construction sector, for example, was down £500m last month, compared with an average drop of £200m over the past six months. Lending to business services companies was in line with the six-month average, dropping by £200m in May, while lending to public administration and defence sectors – or public bodies – rose £300m.