Glimmer of hope for mortgage lending

28 August 2008 / by Rachel Mason
The number of mortgage approvals rose slightly last month suggesting that the worst of the mortgage leading crisis may have passed.

According to the British Bankers Association (BBA), in July, a total of 22,448 mortgages for house purchase, (not including remortgages) were approved, up slightly from June. The figures also revealed that mortgage lending rose by £4.3billion.

Although the figure is still drastically diminished compared to last year – 65 per cent lower – it is an improvement of last month's all time low, suggesting that the worst might be over.

Experts are saying that the numbers suggest that mortgage lending may have stabilised, but warn that it will do little to stop falling house prices.

"The monthly numbers of approvals for house purchase, which have fallen by some

two-thirds over the last year, levelled off in July.

"It would, however, be premature to think that the housing market will now start to recover, because overall approval activity continues to be very low," explained BBA statistics director David Dooks.

"The pressures on household budgets are reflected in the relatively weak rise in individuals’ deposits and, with consumer borrowing growing only slowly it seems that consumers are acting prudently," he said.

Further evidence of the intense pressure on the housing sector as a whole came from Bovis Homes. The house builder - which has cut around 40 per cent of its staff since the start of the year – yesterday reported a sharp drop in profits, from £58.4million in the first half of 2007 to £11.7 million for the same period this year.

Commenting on the figures, David Ritchie, chief executive of Bovis Homes Group PLC said: "The Group has taken decisive action in response to the toughest period of trading it has experienced in its time as a public company.

"It has largely avoided new investments in consented land, has reduced production levels and has restructured to cut operating costs. Having done so, the Group is well positioned to deal with prevailing market conditions."

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