uk mortgage approvals reach 2 year high as other lending shrinks
News Posted On: 29 December 2009
On Wednesday broadsheets carried the good news. UK mortgage approvals had hit a 2 year high. Figures from the British Banking Association (BBA) just released showed nearly 45,000 UK home loans were granted in November, up over 150% from the low point hit just 12 months ago. So are we seeing the beginnings of the next housing boom?
The jump in one year seems spectacular, but it must be remembered that the UK housing market is rebounding from a base where transactions froze as people tried to work out how the banking crisis was going to play out. In the end bail-outs and low interest rates seem to have saved the day .
The BBA in a note of caution warned the abnormally large year-on-year jump did indeed reflect market weakness exactly one year ago more than a currently strong market today. Nevertheless it noted that mortgage approvals were also running slightly above the rate seen two years ago, before the credit crunch really became apparent.
While mortgages soared in 2009, remortgages remained relatively static and moribund. It seems people are unwilling to embark upon 'equity releases' after the shock of house price drops throwing people into negative equity – even if only temporarily. Also stricter lending criteria may be making re-mortgaging less facile than pre crisis limiting potential transaction volume further. While approved mortgages are up slightly on 2 years ago, re-mortgages are actually down by two-thirds for the same period, and equity withdrawals are down by 50% also from 2 years ago.
In these troubled times it seems consumers are looking to pay down debt and build up savings rather than consume. Although credit card spending was slightly up for November compared to October it is still running at a lower level than seen last year. Non-mortgage borrowing via personal loans and account overdrafts contracted for the 12th month in a row by over a half a billion pounds in November.
Indeed the recovery of real estate in 2009 has confounded analysts, with house price and transaction growth far surpassing most predictions. Interest rates are at historic lows, and yet UK consumers have become net savers, relieving pressure for increases going into 2010.
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