Fears of a sharp fall in mortgage approvals prompted by a recent report by the British Bankers Association (BBA) appear to have been ill founded according to the latest data from the Bank of England.
In fact, the Bank reports that mortgage approvals in May were the highest for the month in the last five years. True, they were marginally lower than in April (see table top right), but given a seasonal market, month on month comparisons are less valuable than year on year measures. In that context, approvals this May were the best for that month since the start of the credit crunch. Moreover, mortgage approvals have been higher in every month this year than they have been in the preceding three years (again, see table top right).
It’s also true that the growth rate in mortgage lending has slowed. You can find the latest statistical release from the Bank here. But that is partly down to a rise in repayments – which were £300 million higher in May than they were in April.
I have argued here before that approvals for house purchase are the best measure to use when looking at trends in mortgage lending. They give a good idea of both demand among buyers and the availability of mortgages. Historically, mortgage approvals have been a remarkably good indicator of property market conditions.
The recent improvement in mortgage approvals does not suggest a substantial recovery in transactions or prices any time soon. On the other hand, they give some grounds for optimism.