Page last updated at 09:31 GMT, Monday, 29 June 2009 10:31 UK

Mortgage approvals still rising

For Sale signs
Sales are likely to continue rising over the summer months

The property market continued to pick up in May, according to figures from the Bank of England.

The number of mortgages approved for house buying rose to 43,414, up from the figure of 43,191 the month before.

It was the fourth month in a row that approvals have risen, suggesting that the recent increase in sales is likely to continue.

Recent evidence from lenders has also suggested that the slump in house prices is slowing down.

While the mortgage market appears to have recovered slightly from the start of the year, levels of activity remain depressed
BSA director general Adrian Coles

The Bank of England's figures show that net lending for house buying in May, by all lenders, grew by just £324m - the smallest monthly increase on record.

"Bank of England data suggests that mortgage approvals for house purchases only rose modestly in May," said Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors.

"While mortgage approvals by banks actually rose by around 2,500, loans from building societies and other specialist lenders both fell during the month," he added.

'Depressed' activity

The Building Societies Association (BSA) said approvals by its members in May were still about 35% lower than in May last year.

"Therefore, while the mortgage market appears to have recovered slightly from the start of the year, levels of activity remain depressed," said the BSA's director general Adrian Coles.

Building societies saw their savers withdraw more money than they put in, for the third month in a row.

"Those banks that are supported by the state are able to compete unfairly for retail deposits, and steps need to be taken to ensure that government backing for some institutions does not distort competition for savings," complained Mr Coles.

"These pressures are exacerbated by the current low interest rate environment; there is evidence that households are looking to repay debt rather than save," he added.

Net lending by building societies shrank for the fifth month in a row, reflecting the fact that borrowers have been repaying their mortgages at a faster rate than they have been taking out new home loans.

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