Rise means mortgage lending is 47% higher than last year during depths of credit crunch
Mortgage lending for house purchases leapt by 15% in June to £4.7bn, according to the latest figures from the British Bankers Association.
The rise means the value of mortgage lending for purchases is now 47% higher than it was last year in the depth of the credit crunch, with the number of loans approved rising even more sharply, by 65% to 35,235. This figure was also a tenth higher than the number recorded in May.
The house purchase loans figure bucks the overall trend for lending, which is still contracting. Gross mortgage lending, including re-mortgaging, was still 46% lower than the same month last year in June, at £7.9bn.
The amount of money lent to construction companies continued to contract, albeit at a slower rate than in May, with a net lending figure of £-0.1bn, meaning more money was paid back than lent out. This marked the sixth consecutive drop in lending. In total, construction companies owe £21bn, property developers and other real estate firms owing £153bn. The net amount lent to real estate was £100m, half of that in May.
David Dooks, statistics director at the BBA, said home loans approved by the high street banks were recovering from the very low levels of last November. He said: “After repayments and redemptions, the banks' net rise in mortgage lending of £18bn in the first six months is in sharp contrast to lending by the rest of the market, which is still contracting. People are showing little appetite for unsecured borrowing and are generally keeping more money in their accounts.”
Simon Rubinsohn, chief economist at the RICS, said the figures for new homes mortgage lending matched the increases in buyer enquiries seen by surveyors. He said: “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. 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: “The continuing problems facing the construction industry were visible in the sixth consecutive monthly drop in lending to the sector. Meanwhile although borrowing by the real estate sector edged up again, the suspicion is that this reflects the use of pre-existing credit lines rather than any enthusiasm on the part of banks to raise their exposure to this part of the economy.”