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Mortgage approvals rose in May as house prices continue to fall

29 June 2009 / by Rachael Stiles
The number of mortgage approvals for house purchase rose in May, according to the latest figures from the Bank of England, reaching a higher level than in April, and higher than the previous six month average.

Mortgage approvals for house purchase were up in May to 43,414 loans, compared to 43,191 in April, and an average of 35,670 for the previous six months.

Meanwhile, gross mortgage lending fell in May to £0.6billion, down from £1.1billion in April and lower than the previous six months.

Approvals for remortgaging and other purposes were not in line with house purchase loans, falling below April's figures and the previous six month average.

Commenting on the Bank of England's mortgage approvals data, Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (RICS), said that the figures suggest only a modest rise in mortgage approvals for house purchase, and points out that they are at odds with results from the British Bankers Association (BBA).

"While mortgage approvals by banks actually rose by around 2,500, loans from building societies and other specialist lenders both fell during the month," he explained, but he predicted that mortgage approvals will rise towards the 50,000 mark during the summer, despite May's limited increase.

Meanwhile, the latest figures from the Land Registry show that the decline in house prices has slowed, falling 0.2 per cent in May, the same fall as in April, and lower than the 0.5 decrease seen in March.

The continuing fall in house prices, which is helping house purchasers to climb the property ladder, could explain the negative remortgaging figures, Mr Rubinsohn suggests, as existing borrowers continue to struggle with negative equity and require a higher loan to value mortgage.

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