UK home loan approval rate rises

There are indications that expectations for an interest rate cut are boosting the UK's property market as the number of mortgage approvals continued to increase in June 2005.

In a 12-month high 70,750 loans were approved -- loans agreed but not yet made -- which was higher by 5% from 67,702 in May, said the British Bankers Association, although the figure still missed the previous year's June figure of 88,859 by 20 percent.

Economists believe since the Bank of England is expected to cut its base rate from 4.75%, it is creating ripples in the mortgage market. Evidently net mortgage lending increased by 4.6bn in June, up from in May and down from 5.6bn in June 2004.

As for credit card consumption, the BBA said the credit card borrowing rose to 295m in June compared to the increase of 122m in May. Contrary to this solid growth, lending on loans and overdrafts rose just by 75m - the smallest monthly increase since December 1994.

Recent house price surveys have worryingly revealed that the annual house inflation is hitting multi-year lows. This has triggered a fear among many homeowners who can still recall the late 1980's property crash that left many British citizens burdened with debts greater than the values of their homes. This fear has consequently slowed down consumer spending. The previous interest rate rises and soaring utility bills are already refraining buyers from hitting the shops.

Bank of England Deputy Governor is believed to have told a newspaper that the housing market slowdown might be the reason behind the waning desire of the consumers to spend.

But despite all the negative indicators the market might already be picking up. The increasing number of mortgage approvals in recent months evince that wage growth has started to overtake house price inflation. - By Amrit Hallan for CMR Loan news.

© 2006 CMR. All rights reserved.