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BoE: Home buying approvals fall to four-month low

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01/06/2011
House purchase mortgage approvals relapsed to a four-month low in April of 45,166 after showing a modest improvement to a five-month high of 47,145 in March, according to the Bank of England.

The improvement to March had followed a 21-month low of 42,859 in December.

Remortgaging approvals also dropped back to 28,091 in April from 31,201 the previous month and were notably below the six-month average of 32,534.

In addition, loan approvals for other purposes showed a small drop to 19,970 compared to 20,130 in March and the previous six-month average of 21,138.

Meanwhile, gross mortgage lending rose £0.7bn in April to £11.2bn. This was up on the March’s increase of £0.5bn, but down on the previous six-month average of £0.8bn.

Gross lending increased from £11.1bn in March, but was down on the previous six-month average of £11.3bn, with the three-month growth rate falling 0.3% to 0.7%. Annual growth in lending remained unchanged at 0.7%.

However, mortgage repayments in April increased to £11.2bn from £10.8bn in March, and showed an increase on the previous six-month average of £11.0bn.

Howard Archer, chief European and UK economist at IHS Global Insight, said: “Mortgage approvals may have been held back to a limited extent in April by the extra bank holiday for the Royal Wedding and by the later Easter. Even allowing for any impact from those factors though, mortgage approvals are clearly very low compared to long-term norms.

“Mortgage approvals have actually averaged around 90,000 a month since 1993, while a level of 70,000-80,000 has in the past been considered consistent with stable house prices.”

He added that net mortgage lending was also very low compared to long-term norms.

Archer said: “On balance, we believe that house prices are likely to end up declining by some 10% overall by mid-2012 from their 2010 highs. This implies that they will fall by around 5% to 8% from current levels depending on which house price measure you take.”

Meanwhile, the BSA revealed that gross lending by mutuals totalled £1.62bn in April, up 19% on the same period of 2010, but down from £1.73bn in March.

Net lending was -£462 million compared -£994 million in April 2010, while mortgage approvals by mutuals reached £1.73bn of mortgages in April. This was up 14% on April last year, but a fall from £2.15bn the previous month.

Adrian Coles, director general of the BSA, said: “Lending activity by mutuals continues to improve with both gross lending and approvals in the first four months of the year up over 20% compared to the same period in 2010.

“This is a promising trend, but the number of transactions and the level of mortgage lending are likely to remain low until economic growth recovers and consumer confidence returns.”

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