Mortgage approvals edge higher

Mortgage approvals edged higher in August, the Bank of England said today (Getty Images)

Mortgage approvals edged higher in August, the Bank of England said today, although experts warned the housing market was still finding it hard to sail out of the doldrums.

The number of approvals for house purchase in August increased by 109 to 47,665 from 47,556 in July and an 18-month low of 44,252 in June, the Bank said.

But mortgage approvals were still down by nearly 10% from 52,896 in August last year and below the average level of 50,318 seen through the first seven months of 2012.

Matthew Pointon, property economist at Capital Economics, said: "With demand for mortgage finance still constrained by a lack of confidence, and credit conditions continuing to hold back supply, housing market activity is likely to remain depressed for some time yet."

The Bank last week revealed it had seen an "early impact" of its recently launched £80 billion Funding for Lending scheme as borrowing rates begin to come down and banks boost lending to households and businesses.

Borrowers have faced a tougher time trying to take out a mortgage in recent months as lenders have tightened their borrowing criteria, causing a drop in the proportion of mortgages approved.

The Bank last week confirmed that 13 banks and building societies - accounting for around 73% of UK lending - have signed up to its Funding For Lending programme, which offers lenders cheap funding on the condition that they increase lending to businesses and households.

Today's figures also showed that remortgaging approvals were slightly up in August, with 26,139 approvals worth £3.6 billion, although, like the house purchase figures, remortgaging approvals were lower than those seen in May.

Meanwhile, total consumer credit fell by £134 million - signalling a net repayment - in August as credit card spending increase by around £100 million and other loans, such as overdrafts, fell by £200 million.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "Consumers appetite for taking on new borrowing is limited while there is also an ongoing strong desire of many consumers to reduce their debt.

"Consumers' desire and perceived need to deleverage is clearly the consequence of ongoing serious concerns over the current state of the economy and still heightened worries and uncertainties over the outlook."

PA