Page last updated at 11:53 GMT, Tuesday, 23 March 2010

Mortgage lending still subdued, say banks

Estate agent's window
The rush to beat the stamp duty deadline has held back fresh lending

Mortgage lending to house buyers is still subdued, according to the British Bankers' Association (BBA).

Its latest figures show that the number of mortgages approved in February by the big banks was 35,275.

This was only slightly higher than in January when 35,154 loans to home buyers were approved.

The BBA said the market was still depressed by a rush by buyers to beat the end of the stamp duty holiday at the end of last year.

"House purchase approvals were some 16% higher than in February last year but still well below the figure in December as the aftermath of the year-end change to stamp duty was still working through," said David Dooks of the BBA.

"The average value of house purchase approvals (£140,800) was 11.5% higher than a year ago.

"Volumes of remortgaging and equity withdrawal approvals continued to be lower than a year earlier," he added.

In February 2009, mortgage approvals stood at 30,457 as lending started to recover steadily through the year.

That upward trend has been brought to a halt, at least temporarily, as a result of the stamp duty threshold being brought back down from £175,000 to £125,000.

'Polarised reaction'

Some of the plans to restrict mortgage lending, put forward last year by the Financial Services Authority (FSA), have split the mortgage lending industry.

The FSA has been consulting on its plan to ensure that all lenders check that their borrowers can afford to take on and repay their mortgage loans.

"Our proposal to make income verification a requirement for all mortgages generated a polarised reaction," the FSA said in its feedback document.

"Objections were raised mainly by large lenders, who argued that the proposals would impact negatively on the self-employed, which will trigger an increased usage of fraudulent income documentation."

Not everyone took this view.

The FSA said that consumer groups, small lenders, and some mortgage brokers and trade associations agreed that borrowers should be obliged to prove their ability to repay, even if they had varied or irregular sources of cash.

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