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Mortgage demand shows market confidence

25th November 2005 | back to article listings BACK    print this article PRINT

New mortgage data released today by the large British banks shows that the property market is picking up after a difficult year of ups and down.

According to the Major British Banking Group (MBBG), lending in September and October was at its highest level since the peak of the property boom in July last year, after banks loaned £17.5 billion out to the general public. Analysts are pointing to the figures as indicating a slow revival in the market, with investors urged to snap up properties fast before interest rates rise again.

The figures from October were a full 16 per cent higher than the same period last year, with the average loan approval for a house purchase being £129,500. There was also a 22.5 per cent increase in the number of loans approved for house purchases.

It is expected that the housing market will start to pick up again over the next few months after a series of recent figures have put some of the confidence lost over the past couple of years back in. But the introduction of the government's new housing packs next summer is expected to cause a flooding of supply before then to escape the new legislation.

It now seems that buyers are starting to realise the potential in the market, which has been somewhat stagnant for months. Buying at the right time could net investors a fortune, they are being advised. "At this time last year, the trend in net mortgage lending was on a clear downward path," said David Dooks, director of statistics at the British Bankers' Association.

"Having stabilised in the spring, the trend has hardly moved since, but with gross lending and approvals, particularly for house purchase, now seeing higher levels than corresponding months in 2004, the mortgage market seems particularly resilient as we enter what is usually a period of lower demand," he said.

Howard Archer of the consultancy firm Global Insight agrees: "Overall, the data suggests that the housing market is seeing reasonably healthy turnover at the moment. This is also borne out by the latest survey evidence consistently showing increased buyer interest. Clearly, August's interest rate cut has supported housing market activity, along with reduced fears that house prices could crash."

MBBG accounts for some two-thirds of all mortgage lending outstanding and around 70 per cent of gross lending. Sales activity has seen a modest increase and surveyors are reporting a rise in buyer activity of eight per cent from their low in February, though the figures are still five per cent down on a year ago.

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