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UK Mortgage Approvals Reach 15 Month High

by Jim ONeil on September 21, 2011

in Mortgages

In August, UK home loan approvals managed to climb to a 15-month high. High loan-to-value lending and relaxed lending criteria led approvals to climb to 49,566 during August. This was a 4.3 percent increase from the August 2010 figure, the largest year-over-year increase since May 2010. Many months of negative annual growth have finally been reversed.

Looser lending criteria allowed more buyers to get mortgage loans with smaller deposits. In August, loan-to-value lending reached the highest level in 2011. This goes against the credit conditions survey from the Bank of England that claimed lenders would be focusing on low loan-to-value loans during third quarter 2011. During August, over ten percent of total approvals were for loans with deposits of 15 percent or less.

Purchase approvals for high loan-to-value mortgages grew at nearly twice the pace of the overall mortgage market during August. However, lending criteria loosened the most at the lower end of the market, spurring an increase in low-income homebuyers. Mortgages within the price range to £125,000 represented 24 percent of all home loan approvals, the highest figure since April.

In general, August is a quiet month for mortgages. It was unusually bad for London, which experienced a ten percent decrease in purchase approvals from July. This reminds us that the more positive signs may not indicate long-term recovery. Richard Sexton, e.surv business development director, commented that major lenders on high street are facing stringent capital requirements and “weak economic growth.”

The slightly loosed lending criteria barely affects the huge backlog of homebuyers still in the rental market, said Mr. Sexton. For the individuals able to get mortgages, low loans APR for fixed rate mortgages should continue. Somehow, the UK has managed to repel the economic epidemic sweeping the world, he said. Homebuyers will benefit with cheap loans during the near future.


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