Page last updated at 10:58 GMT, Tuesday, 26 January 2010

Mortgage approvals 'on the rise'

Sale signs
House prices have recovered in recent months

The number of mortgages approved for house purchases rose at the end of last year, according to figures from the major UK banks.

But overall, mortgage approvals in 2009 were 27% lower than the previous year and the lowest since British Bankers' Association records started in 1997.

Some 45,897 home loans were approved for house purchases last month.

This showed the extent of the recent recovery in the mortgage market as it was double that of December 2008.

The association's statistics director David Dooks said the proportion of mortgages approved by the major UK banks had grown.

He said the squeeze on mortgage lending during the downturn had come from specialist lenders largely withdrawing from the market and a contraction in building society finance.

Stamp duty

Gross mortgage lending by the High Street banks rose from £9.6bn in November to £10.2bn in December.

The stamp duty holiday expiring at the end of the year... has led inevitably to a lot of rushed-through house purchases
Brian Murphy, Mortgage Advice Bureau

This was also 12.5% higher than December 2008, and was boosted - according to the British Bankers' Association (BBA) - by borrowers bringing loans forward before the stamp duty holiday came to an end.

The temporary stamp duty holiday on properties worth between £125,000 and £175,000 ended on 1 January 2010. It means buyers will again have to pay 1% tax on the value of homes worth more than £125,000.

"Historically, we would see a drop off in mortgage purchases in December, but with the stamp duty holiday expiring at the end of the year, this has led inevitably to a lot of rushed-through house purchases," said Brian Murphy, head of lending at mortgage brokers Mortgage Advice Bureau.

"What we are likely to see in January and February is an unusually large drop off in mortgage purchases, because sales which would normally have been concluded in the first two months of this year have been pushed through in December."

According to the BBA, the level of those remortgaging remained low in December - at 23,480 - as people continued to choose to move to their lender's standard variable rate (SVR), rather than move to a new fixed-rate deal when their term came to an end.

It remains to be seen whether this trend will continue after a recent move by Skipton Building Society to raise its SVR sharply, and whether this will produce any possible response by other lenders.

Saving up

The BBA figures also showed that, in December, people continued to pay back unsecured debts rather than borrow more on personal loans, and savings showed a rise following a low figure in November.

Demand for personal loans was particularly weak and balances fell by £3.9bn over the course of 2009, the figures showed.

Total consumer credit has contracted by 2.2% over the last year, the BBA said.

Consumers repaid £5.9bn on credit cards in December while they spent £5.8bn. However, the interest and charges involved in having a credit card meant that outstanding credit card debt rose by £130m during the month.

Personal loans and overdrafts contracted by £475m in December, the 13th consecutive month during which consumers have repaid more than they borrowed.

The amount consumers saved in personal deposits increased by £3.6bn in the final month of 2009, accelerating from a rise of just £1.4bn in November.

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