UK Mortgage Approvals Hit 3-1/2 Year High in May

on Jul 2, 2013
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iNVEZZ.com Tuesday, July 2nd: Mortgage approvals in Britain rose above analyst forecasts in May to their highest monthly total in three and a half years, new Bank of England (BoE) data has shown, indicating that government initiatives are aiding a recovery in the UK housing market.

British banks approved 58,242 mortgages in May, the highest since December 2009. This was well above economists’ expectations of around 55,000, and a steep jump from the previous month, when lenders approved 54,354 home loans, figures from the BoE showed yesterday. BoE’s figure for May was also well above the 36,102 mortgage approvals estimated by the British Banker’s Association (BBA) last week (UK Mortgage Approvals Soar to 16-Month High).

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BoE’s figures for remortgaging also showed an increase, with 32,611 loans switched to a new lender. The number of remortgages has been increasing month-on-month, and May’s figure compares to a previous six-month average of 28,717. The increase suggests record low mortgage rates aimed at homeowners with large amounts of equity are finally starting to tempt borrowers mulling property investment into making a move.

The total amount of new lending secured on residential properties rose to £14 billion in May, although the rate of growth in outstanding mortgage debt slowed, BoE further estimated. The central bank’s figures showed the value of outstanding secured loans was up £0.3 billion in May against a six-month average of £0.6 billion.
**Funding for Lending and Help to Buy Boost Property Investment**

BBC News quoted Philip Shaw, an economist at Investec, as saying yesterday: “No real surprise that the mortgage approvals numbers were strong. They had been flagged from a firm report from the BBA a week or so ago. The Funding for Lending scheme is helping to increase mortgage availability and push down mortgage rates.”
Mortgage availability has sharply increased and home loan rates have fallen since the government launched its Funding for Lending scheme last August, followed by Help to Buy designed specifically to help people to get a mortgage with a smaller deposit. The initiatives were also cited by real estate firms and homebuilders as a major factor boosting demand for property investment.

Persimmon (LON:PSN), the UK’s largest homebuilder by market value, stated today that the number of homes being reserved by customers each week had risen 30 percent since the introduction of the Help to Buy loans in March, as compared to the same period last year. The company said that 1,124 of its customers had reserved homes using the Help to Buy programme, which “has generated a positive response from prospective homebuyers, bringing additional momentum to the traditionally stronger spring sales season.”
!m[Government-Aided Mortgage Lending Spurs Home Reservations at Persimmon](/uploads/story/3575/thumbs/pic1_inline.jpg)
Persimmon’s weekly private sale reservation rate rose 12 percent in the first six months of the year. Total revenue climbed 12 percent to about £900 million. The group’s average selling price rose five percent to about £179,200 in the first half of 2013. The company completed 5,022 homes, up seven percent from a year earlier.
**The Persimmon share price in London was 0.40 percent down at 1,233.00p as of 09:02 GMT on July 2. The homebuilder’s stock has gained almost 55 percent in the year to date.**

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