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UK Mortgage Loan Approvals Reach 20-Month High

by Jim ONeil on October 3, 2011

in Mortgages

Finally, there is some positive news regarding UK home lending. Bloomberg reported that August UK mortgage approvals increased to the highest level in 20 months. Record low borrowing costs helped support the housing market, with lenders granting 52,410 home loans, according to the Bank of England.

This is higher than the figure predicted by economists surveyed by Bloomberg News.

The benchmark interest rate remained at 0.5 percent in September. Nationwide Building Society stated that this should help support property demand. This month, UK home prices have changed little, according to the Society. The group reported that the economic slowdown has led to an increase in “downside risks” within the housing market.

IHS Global Insight economist Howard Archer said it appears that interest rates will remain at their current low level until 2013. However, he believes that cheap loans for homes will be outweighed by “negative economic fundamentals.”

The good news remains, with consumer credit increasing by 500 million pounds between July and August and mortgage lending rising by 600 million pounds. Following the Bank of England report, the pound changed little against the dollar.

Since March 2009, the benchmark interest rate from the Bank has been the same. Despite this, the property market continues to struggle. Consumer confidence has weakened due to increasing inflation, governmental budget cuts, and a stalled economic recovery.

The increase in mortgage approvals is only about 50 percent of the 103,000 monthly average during the decade through 2007, pre-financial crisis.

The Bank of England reported that secured credit availability and mortgage demand increased during the three months through early September. Adverse conditions in the wholesale market and an increase in funding costs for banks may constrain lending in the future.

Bank official Ben Broadbent may cast a Monetary Policy Committee vote to purchase more bonds due to deteriorating economic prospects.

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