Page last updated at 11:16 GMT, Tuesday, 29 September 2009 12:16 UK

Mortgage approvals dip in August

Notes and credit card
Personal debt rose again in August

The number of new mortgages approved, but not yet lent, has fallen for the first time in 10 months, according to figures from the Bank of England.

In August there were 52,317 approvals, down slightly from 52,404 in July.

The data adds to growing evidence that the recent revival in the property market may have reached a plateau.

Other figures from the Bank showed that total personal debt grew again in August, after falling in July for the first time on record.

Personal debt rose by £700m last month, taking the outstanding amount in the UK up to £1,457bn.

An extra £1bn was added to mortgage debt in August, partly offset by a second consecutive month in which consumer credit - such as credit card debt, personal loans, and hire purchase agreements - fell by £300m.

"Housing market activity has flattened off, but remains stable and well above the very low levels seen a year ago," said Paul Samter, economist at the Council of Mortgage Lenders.

Lending hasn't completely seized up, it's just very depressed
Building Societies Association

"The weak economy and limited capacity to lend is continuing to restrict further improvement and we expect lending to remain subdued," he added.

Market 'remains depressed'

House sales and prices have picked up since the start of the year, but the revival appears to have stalled over the summer.

This week, the Land Registry said house prices in England and Wales fell slightly in August, dropping by 0.1% during the month.

Last week, a small drop in the number of property sales in August was reported across the UK by HM Revenue & Customs.

And the Council of Mortgage Lenders reported that new mortgage lending in August was lower than in July.

Adrian Coles of the Building Societies Association said lending by his members had been subdued last month.

"[It] appears to be at broadly similar levels to recent months after seasonal factors are adjusted for," he said.

"Despite signs of a modest improvement in market conditions in recent months, activity will not return to normal levels until funds for mortgage lending are more widely available to building societies and other lenders," Mr Coles warned.

Mortgage approval bar chart

However, the Royal Institution of Chartered Surveyors (Rics) took a more optimistic view.

"New buyer enquiries suggest that mortgage demand is continuing to grow relatively strongly," said Rics chief economist, Simon Rubinsohn.

"However, it is not just the scarcity of mortgage finance which is making it difficult to satisfy this demand.

"The lack of appropriate properties on the market is compounding the problem by leaving prospective buyers with little real choice in some parts of the country," it added.

Squeeze

The low rates of interest that building societies are able to offer to their savers are severely inhibiting their ability to lend money to potential home buyers.

In seven of the first eight months this year, savers took out more money from their building society accounts than they put in as fresh savings.

Societies have also found it hard to borrow extra funds from other financial institutions, paying back more than they borrowed from wholesale funders in six of the first eight months of the year.

In August, building societies as a whole, including the giant Nationwide, approved 8,246 mortgages for house purchase, just 16% of the total.

"There is more competition from banks, including the semi-nationalised ones, and people aren't saving as much with interest rates so low," said a BSA spokeswoman.

"Lending hasn't completely seized up, it's just very depressed," she added.



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