Mortgage Blog: Banks Criticised As Mortgage Approvals Remain Low

Mortgage lending in the UK was steady in January 2012 but still significantly less than the pre-credit crunch days of 2008

. New figures from the British Bankers Association show that the major banks' gross mortgage lending stood at 8.3 billion in January, down from 8.9 billion in December 2011.

Experts have criticised the banks for failing to support the economy by restricting mortgages to those with large deposits. But the number of house purchase applications approved in January 2012 was at its highest level for two years. So is the market improving or not?

Taxpayer-owned banks should be supporting mortgage market

Gross mortgage lending in the UK has remained steady for the last few months. January 2012's figure of 8.3 billion was 2.2 per cent higher than January 2011 but remained at the six-month average. Some experts have been fiercely critical of the banks' reluctance to lend, particularly those institutions under taxpayer control.

Nick Hopkinson, director of property firm PPR Estates, says: "The high street banks approved a mere 23,392 house purchase loans in January 2012. This is down over 50% on the normal market levels we were seeing pre-credit crunch, even though the main banks have been taking market share off building societies and other lenders in the last couple of years.

"25%-plus deposits and perfect credit scores remain essential if you want to borrow money at the moment which rules many prospective buyers out. When you consider that two of the biggest high street lenders, Lloyds and RBS, are currently taxpayer-owned and in theory have almost infinite reserves to lend from, this is a damning indictment on banker activity to support the economy - just when struggling homeowners need money most."

House purchase applications rise in January 2012

However, despite this alleged lack of mortgage lending, the number of house purchase applications approved in January 2012 actually rose to 38,092. This is the highest seen for two years and 34% higher than in January 2011. It was up from 36,553 in December and the six-month average of 34,961. The rise has been partly attributed to an increase in the number of first-time buyers keen to take advantage of the Stamp Duty holiday before it ends in March.

While the figures look encouraging, Nick still believes that the property market still has a long way to go to recover. He adds: "With Stamp Duty on first-time buyer homes set to return to 1% for all purchases above 125,000 very soon, it seems things are not going to get any easier for the housing market."

by: Keith Osborne

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