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Mortgage approvals hit five-month high

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The number of mortgage approvals hit a five-month high in September, fuelled by property purchase as the remortgage market contracted.

Data from the British Bankers’ Association showed mortgage approvals reached 31,175 during September, up from the figure of 30,683 in August but down 6% on the same month in 2011.

Figures for remortgaging have also dropped sharply over the past year, falling 15% from September 2011 figures to 20,111.

Net mortgage lending in the banking sector grew by 0.5% across the year to September while gross mortgage lending hit £7.3bn during the month.

David Dooks, BBA statistics director, said: “The continuing economic uncertainties both in the UK and in the Euro area are having a dampening effect on activity within firms and households.

“Households are reducing borrowing requirements and have no appetite to take on more/new debt. Where they can, individuals are putting money aside for household expenditure.

“[Meanwhile] Firms are holding back on borrowing for investment until trade prospects improve.”

Howard Archer, chief European and UK economist at IHS Global Insight, added: “The BBA’s mortgage data points to a housing market still struggling to get out of the doldrums and we see no reason to change our view that house prices will trend gradually lower over the final months of 2012 and early months of 2013 at least.

“Specifically, we expect house prices to drift down by around 3% from current levels in the face of persistent limited market activity, still relatively low and fragile consumer confidence, and muted earnings growth.

“Furthermore, the housing supply-demand balance currently seems to be in favour of sellers overall.”

Ashley Brown, director of brokerage Moneysprite, commented: “It’s that weak demand that now poses the most serious threat to the mortgage industry.

“With rates at 90% loan to value (LTV) below 5% and at 95% LTV below 6%, price is no longer an obstacle. Lack of demand and people’s struggle to find deposits, rather than prohibitively high rates, are now holding the industry back.

“The cause may have changed, but the symptoms, and the pain, are the same.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Several lenders have cut rates on residential and buy-to-let mortgages as swap rates remain low and the funding for lending scheme enables banks to borrow for less.

“Even newer, non-traditional lenders such as Tesco are getting in on the act, launching a range of deals including a bargain two-year fix at less than 2%. However, this and other cheap rates remain the preserve of those with hefty deposits.”

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