Property loans from mainstream banks in UK rise over 150% in last 12 months

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Loans for property in the UK have reached their highest level for two years, increasing speculation that the real estate market will continue its recovery in 2010.

The number of mortgages approved for purchase increased 152.3% in November compared with the same month last year, according to figures from the British Banking Association.

The average loan size increased to £142,200 in November, a rise of 21.8% compared with the same month last year.

The total value of mortgages approved for house purchase rose to £6.6 billion, more than £1 billion up on the average of the previous six months and an increase of 208.7% compared with a year earlier.

The BBA though has said comparisons with the low point in the property market reflect the weakness of the market then rather than indicating a much stronger market now.

Gross mortgage lending also increased over the past six months, with lending in November standing at £9.2 billion, up from £9 billion n in October and a substantial increase on the £8.6 billion average of the previous six months. But it remained 12.2% lower than last November.

Borrowing for remortgages remains low, however, with the number approved down 62.7% on two years ago and a drop of 25.3% compared with November last year. Low standard variable rates reflecting the Bank of England base rate, currently 0.5%, have encouraged borrowers to stay with their lender rather than chase competitive deals elsewhere, the BBA said.

‘In the housing sector, prices have continued to edge up and approvals for house purchase are now back at a similar level to that of two years ago. Remortgaging activity continues to run at a low level as borrowers revert to low standard variable rates or trackers from maturing fixed-rate loans,’ said BBA’s director of statistics, David Dooks.

Oliver Gilmartin, Royal Institution of Chartered Surveyors senior economist said that the figures add further weight to its view that house prices will continue to move higher during early 2010.

‘Lending from mainstream banks has returned to levels last seen two years ago, although remains around 30% below the levels pre dating the credit crunch. The rise in demand continues to outstrip supply, although recent indications are that potential vendors that became reluctant landlords at the start of the downturn, may be taking this improved pricing environment to place properties for sale,’ he added.

“There are growing concerns that current momentum in the market will see house prices move close to pre crises highs in 2010 stretching affordability further. However, RICS expect the market to take a reality check in the second half of 2010, as longer term borrowing costs start to rise pushing the costs of funding for fixed rate mortgages upwards. But, despite some moderation in the second half of the year, house prices could well end the year marginally higher.”

 

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