Property loans in UK rise but out look still muted, real estate experts warn

The residential property market in the UK is still in a fragile state despite the latest property loans figures showing that the number of mortgages improved last month were at their highest since March last year.

Figures from the British Bankers Association show that 35,235 mortgages were approved in June, up from 31,919 the previous month, the BBA said.

The association claimed that the property loans 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.

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.

The increase in mortgage approvals raises hopes that there will be subsequent rise in activity in the property market but not everyone is convinced. The Royal Institute of Chartered Surveyors described the figures as positive but chief economist Simon Rubinsohn pointed out that they are still at an historical low. ‘The reading on this indicator in the June survey was sufficiently strong to suggest that mortgage approval activity will rise further over the coming months,’ he said.

‘That said, it is important to recall that the absolute level of mortgages being sanctioned is still low by historic standards and consistent with a relatively fragile housing market,’ he added.

Howard Archer, chief UK economist at IHS Global Insight, said the outlook is likely ‘to remain muted compared to long-term norms for some time to come, given still tight credit conditions and poor economic fundamentals, despite the improvement seen from earlier this year’.  Andrew Montlake, director of mortgage broker Coreco, is not convinced that there has 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. I believe that 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,’ he explained.

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