Gradual Recovery Exaggerated by Yearly Home Loan Approvals Increase

Fri, 25 Sep 2009

The British Bankers Association (BBA) has revealed an 81 per cent year on year increase on the number of mortgage approvals in August. Major banks approved 38,095 home loans for house purchase in August, compared with 21,001 loans in August 2008. The major banks are now finally responding to the Bank of England funding to help shore up their balance sheets, and have become more active in recent months. Net mortgage lending increased by £2.8 billion in August, in line with the six month average.

The figures indicate a more rapid recovery than is actually the case, with the extremely low lending levels of last year resulting in exaggerated figures. Indeed, the number of loans approved actually fell slightly in August compared to July, after seven months of gradual rises.

Although banks have become more willing to issue personal loans, mortgages and other forms of credit, consumers remain cautious and are not looking to take on extra debt . The total amount borrowed by consumers on credit cards fell by 13.6 per cent in August compared with the previous year, while savings levels increased by £3.3 billion in August.
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