Mortgage lending to homebuyers ticked up for the third consecutive month in February, new figures showed today.
High street banks approved 28,179 home loans for house purchase last month, up from 24,278 in January, and well above the six-month average of 22,068.
However, this was still more than 30 per cent lower than the number of loans approved in February last year. And hopes that this could signal a pick up in the housing market were dented as the British Bankers’ Association, which compiled the figures, downplayed the rise in approvals.
David Dooks, statistics director at the BBA, said: “The higher number of loans approved for house purchase simply reflect the banks’ greater market share.”
Some of the major banks, which have received multi-billion pound bailouts from the Government, have been urged to step up their lending in a bid to ease the liquidity crisis currently gripping the country.
Lloyds TSB has said it will lend an additional £14 billion this year, while RBS said it would extend an extra £25 billion in lending.
Meanwhile building societies have been forced to rely more heavily on savers’ deposits to fund their lending - a difficult task as interest rates remain at historic lows.
The lack appetite amongst savers for accounts offering meagre returns was illustrated as the BBA said that deposits into bank savings accounts fell by £73 million in February, following January’s record fall of nearly £2 billion.
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said that while the BBA’s figures showed that the increase in buyer inquiries was now feeding through into actual transactions, there was no turnaround in the market.
“The actual level of activity still remains not that far away from historic lows and it would be premature to conclude that some semblance of order has returned to the housing market,” he said.
The number of re-mortgage deals approved by banks fell to 28,746, down from 30,336 in January, as more homeowners opted to switch to their lenders’ standard variable (SVR) rate rather than choose a new fixed-term mortgage. SVRs have dropped to new lows as the Bank of England has slashed the base rate in recent months.
There were also signs that consumers were cutting back further on spending, repaying £269 million more on overdrafts and personal loans than they borrowed during the month, the BBA said.
The property market showed signs of stabilising during February but any recovery is being held back by the mortgage drought, the UK’s biggest estate agent said today.
Your Move said new buyer registrations had boomed during January and February, while internet traffic was back up to 2006 levels and house price falls were beginning to slow.
Overall, it said interest from potential buyers was at its highest level during February since Easter last year.
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