Page last updated at 09:36 GMT, Thursday, 23 July 2009 10:36 UK

Banks 'approving more mortgages'

For sale signs
Banks have a greater ability to lend, the BBA says

Mortgage approvals by the major banks increased to a 15-month high in June, according to the British Bankers' Association (BBA).

Some 35,235 mortgages were approved for house purchases in June, up from 31,919 the previous month, the BBA said.

The figures reflected the banks' increased ability to lend and was 65% up on the same month a year earlier.

However, the appetite for remortgaging and for borrowing with other loans remained subdued, the group said.

Typical loan

The increase in mortgage approvals raises hopes that there will be subsequent rise in activity in the property market.

David Dooks, the BBA's statistics director, said that approvals were recovering from a very low level since last November, but he suggested that the pick-up in mortgage lending by the major banks was in sharp contrast to a contraction in lending by other home loan providers.

Andrew Montlake, director of mortgage broker Coreco, was not convinced that there had been a significant shift in the housing market.

"Some recent mortgage figures, including the BBA's, have led some to suggest things are finally beginning to pick up, but I don't buy it," he said.

"From where I am standing, the next few months are still going to be exceptionally difficult for borrowers and this will only change once the lenders begin to lend - and they are still not lending at levels sufficient to drive a sustained recovery in the property market."

The average value of a mortgage being approved by the major banks stood at £136,400, nearly 11% lower than a year earlier - reflecting falls in house prices. Gross mortgage lending rose slightly, the first increase since April 2008.

The number of approvals for remortgaging rose slightly in June, compared with May, to 28,133, but this was down 52% on a year earlier.

Credit cards

The BBA said that spending on credit cards remained stable, with people paying back as much as they were borrowing on plastic.

However, personal loans - often for big purchases such as a new car - fell by £1.3bn in the first six months of the year. Overdraft balances remained steady.

"People are showing little appetite for unsecured borrowing," said Mr Dooks.

With interest rates still low, the trend in people putting deposits into savings accounts with the major banks remained "weak", the BBA said.

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