Slight lift in mortgage markets last month

The mortgage market improved slightly last month (GETTY IMAGES)

The mortgage market improved slightly last month, official figures showed today, but still remained muted as concerns over the state of the UK economy lingered.

The number of mortgages approved for house purchase increased by 1% during May to 45,940, the Bank of England said.

The string of bank holidays was blamed for a slump in activity in April as the additional days off distracted people from moving or remortgaging - but May's figure for approvals was still lower than in March.

The number of approvals for remortgaging also increased marginally, by nearly 2% to 20,491, as the threat of an imminent rate rise receded.

Net mortgage lending rose slightly compared with the previous month but remained muted at £1.1 billion which, while up from £1 billion in April, remained low compared to long-term averages.

The figures were broadly in line with data reported by the Council of Mortgage Lenders (CML), which showed a rise in activity during May.

The CML said a total of £11.3 billion was advanced during May, up from £10.1 billion in April, and also 1% higher than a year ago.

Howard Archer, chief UK and European economist at IHS Global Insight, said continuing muted mortgage approvals in May reinforced a belief that modest falls in house prices are likely over the coming months.

He said: "It is notable that mortgage approvals in May were still below March's level, given that they were likely held back to a limited extent in April by the extra bank holiday for the royal wedding and by the later Easter."

Brian Murphy, head of lending at independent mortgage broker Mortgage Advice Bureau, said the crisis in Greece was spooking mortgage markets abroad.

He said: "The UK economy is still very much in intensive care while the property market, with the exception of London, is falling further into the red.

"Throw in the ongoing drama that is Greece and it's no surprise that prospective buyers are ultra-cautious."

Unsecured borrowing slowed in May on a month-on-month basis rising to £173 million, compared to £504 million the previous month.

Within the total, credit card lending rose by £34 million - the lowest increase in 13 months - after it rose £347 million in April.

Borrowing through loans and overdrafts increased by £139 million, down slightly on the £157 million increase the previous month.