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Mortgage lending misery continues despite remortgaging strength

25 June 2008 / by Joy Tibbs
According to the British Banker's Association (BBA), May saw another weak month in the mortgage market, and the association is predicting that the sector is likely to remain "subdued" for some time.

Its data for May shows a steep decline in mortgage lending compared with the previous month. Lending fell to £4billion compared with £5.2billion in April, although levels were up 12.3 per cent year-on-year.

Gross mortgage lending for May was £16.2billion, down from £17billion in April and falling 15.9 per cent compared with May 2007. The total number of approved mortgage loans dropped significantly to £14.3billion in May compared with £16.3billion in April, and fell 31.4 per cent on an annual basis.

Mortgages approved for house purchase in May totalled £4.3billion compared with £5.4 billion in April, while the year-on-year decline was a staggering 56.8 per cent.

In terms of volume, just 27,968 mortgages for house purchase were approved in May, down from 34,752 in April. The annual decline was 56.1 per cent. And the average loan value was £155,000, down 1.2 per cent compared with May 2007.

However, remortgaging levels remained fairly robust. According to the BBA, 63,303 remortgages were approved in May compared with 68,971 in April, and the annual decline was just 10 per cent. Moreover, the average remortgaging loan value at £144,000 was up 6.3 per cent year-on-year. Remortgaging accounted for 53 per cent of all mortgages approved in May.

BBA statistics director, David Dooks, said: “Measures of mortgage activity were lower in May as a result of tighter lending criteria and economic pressures on households. Only remortgaging business is holding up, where people need or want to take advantage of deals with other lenders.”

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