Business

Mortgage approvals at five-month low, says Bank of England

Mortgage application form
Image caption Fewer people took out mortgages in February

The number of mortgage approvals in the UK fell to a five-month low in February, according to the latest figures from the Bank of England.

The Bank said there were 51,653 mortgage approvals in February, the lowest since September last year.

The news comes in spite of other recent signs of a pick-up in housing market activity.

Both the Halifax and the Nationwide have reported recently that prices are now rising.

The number of mortgages available in the market has increased, and some mortgage rates have fallen.

But Brian Murphy of the Mortgage Advice Bureau said: "The fact that overall mortgage approvals slipped again - with house purchase approvals down for the second successive month - shows how important it is to encourage more activity in this area."

The figures are supported by a recent report from the British Bankers' Association, which said that mortgage lending in February was the lowest since the summer.

'Keen to lend'

Also on Tuesday, the Building Societies Association (BSA) reported a big increase in the amount its members are lending to homebuyers.

Building societies lent £2.5bn in February, the BSA said, a 29% increase on the same month a year ago.

However, that does not mean that overall lending has increased. Rather, as some banks have cut back on mortgage lending, building societies have been taking a greater share of the market.

Image caption The BSA says building societies are winning a bigger share of the mortgage market

They were responsible for 23% of all the UK's home loans in February, compared with 18% in 2012.

"Building societies are keener to lend than some of the banks and they have been winning back market share," said Simon Tyler, a mortgage broker based in Surrey.

Bank of England figures showed that Lloyds, Santander and RBS all lent less money out in the final three months of 2012 compared with the previous quarter.

Smaller deposits

The government introduced its new Help to Buy scheme on 1 April, which allows homebuyers to put down a deposit of just 5%.

Under the scheme, up to 20% of the purchase price can be funded by an equity loan, which in effect gives the government a stake in the value of the home.

But the BSA said it was a shame that such a programme was needed, and it maintained that building societies asked borrowers for smaller deposits than banks.

"If all lenders acted to help first-time buyers and other creditworthy borrowers with smaller deposits, as mutuals have done consistently over the last year and more, this intervention would not be needed," said Paul Broadhead, the head of mortgage policy at the BSA.

The government's Funding for Lending Scheme (FLS) may have improved mortgage availability, even if the number of mortgage approvals continues to fall.

Under FLS, banks and building societies are able to borrow money from the Bank of England at cheap rates, providing they lend it out to individuals and businesses.