Mortgage lending continues to rise

The number of mortgages approved for house purchases more than doubled in the year to November as the housing market continued to recover from the impact of the credit crunch, figures from the Bank of England (BoE) showed today. A total of 60,518 mortgages for homebuyers were approved during November 2009, the highest level since March 2008 and more than double the 27,330 approved in November of the same year. However, the low interest rates which have been a factor in borrowers returning to the market have also deterred remortgagors from switching at the end of special offer rates. Just 24,897 remortgages were approved during November compared with 41,777 a year earlier when interest rates were still on the way down. The BoE figures show that 113,547 mortgages were approved during the month with a combined value of £12.2bn – slightly above the six-month average of £11.8bn. The net value of mortgages advanced to borrowers, a figure which strips out repayments and redemptions, rose by £1.5bn against a previous six-month average of £0.7bn. Total net lending to individuals, which includes unsecured borrowing in the form of personal loans, credit cards and overdrafts, also increased during the month, rising by £1.1bn in November compared with a £0.5bn rise in October. Continuing repayments The Bank's figures show that borrowers continued to pay down unsecured debt over the month, with outstanding consumer credit falling by £376m. This is less than was repaid in October when net repayments reached £591m, but almost double the six-month average. Credit card lending increased by £0.2bn but other loans and advances fell by £0.6bn. Separate figures published today by the Building Societies Association (BSA) suggest some of the money being used to pay down debt is coming out of savings accounts. It said its members had seen the value of accounts fall by £0.6bn in November. If the value of interest paid into those accounts is excluded, the figure for withdrawals from building societies rises to £0.8bn. The BSA's director general, Adrian Coles, said the low level of the BoE base rate was acting as a disincentive to savers. "Building societies and other deposit takers continue to face heightened competition from institutions with a government guarantee, which is creating further distortions in the savings market. "In particular, National Savings offered a product in November which is likely to have resulted in substantial withdrawals from private sector institutions, including building societies." Howard Archer, chief UK economist at IHS Global Insight, said: "The fifth successive net repayment in consumer credit in November is clearly the consequence of many consumers' desire to reduce their debt, low demand for credit, and a lack of availability of unsecured credit from banks. "It is yet another example of consumers looking to improve their financial situations in the current difficult and worrying economic environment."