July records slowest rate in fall in mortgage lending approvals |
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Fri, 26 Aug 2005 16:05
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LONDON: July saw the slowest rate of fall in mortgage lending approvals for home purchases in a year, suggesting housing market in the U.K. is stabilising. The number of approvals - loans approved but not disbursed - fell by 6 per cent in July from a year ago to 65,611, compared with an annual declining rate of 20.4 per cent recorded in June.
The British Bankers' Association said this has been the slowest rate of decline since approvals started falling a year ago as the housing market faced a serious slow down. Housing market is a key indicator in Britain on the spending pattern of the people.
Analysts feel it will be unwise to jump to conclusions as it is too early to conclude the housing market is stabilising. Prospective investors could also be waiting then for the expected interest rate cut, which was finally announced in August.
The Association said approvals in July were 7.3 per cent lower than the 12-month high of 70,750 in June. The average value of loans approved went up by 9 per cent from a year ago at 132,700 pounds. This could also indicate existing home owners were selling to buy larger spaces, rather than increase in the number of first-time buyers.
Industry watchers feel there must be more number of new buyers as they tend to buy at the bottom of the chain ensuring more number of transactions. But the prevailing higher interest rates has been deterring such home buyers.
The association revealed that underlying seasonally adjusted mortgage lending increased by 3.7 billion pounds, the weakest rise since December 2001, against 4.7 billion pounds in June. Credit card borrowing was modest in July, a sign that retail sales are slowing. In fact, retail sales were down 0.3 per cent, the biggest monthly drop since March.
In spite of the .25 per cent interest rate cut, borrowing costs in the country remain the highest in the Group of Seven Industrialized nations. Analysts feel home buyers are reluctant to enter the market as they feel there could be further cuts in the interest rates.
Meanwhile, the Royal Institution of Chartered Surveyors said house values fell at the slowest pace in five months in July. And according to HBOS Plc, the largest mortgage lender in the country, the annual house price inflation slowed to the lowest in the three months through July.
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