DATA SNAP: UK March Mortgage Lending, Approvals Surge

Mon, Apr 30 2007

LONDON --U.K. mortgage lending surged in March after three months of slowing, while mortgage approvals rose to a four-month high as house buyers clamored to take up the remaining best fixed-rate mortgage deals on the market before an expected May Bank of England rate rise, the British Bankers Association said Monday.

Gross mortgage lending totaled GBP18.634 billion, up from GBP14.949 billion in February, and 5% higher than the GBP17.673 billion recorded in March 2006.

Mortgage approvals for new home purchases totaled 75,098 in March, the highest total since 78,626 in November 2006 and up from 54,659 in February. Despite the increase, the number of approvals remained below year-ago levels with 85,098 mortgage approvals reported in March 2006.

"Strong levels of gross mortgage lending reflect homebuyers and homeowners seeking out fixed-rate mortgages as protection against rising interest rates," said David Dooks, BBA director of statistics.

However, Dooks said overall mortgage demand appears to be weakening.

"In the last two months net lending has risen less sharply and, compared to the same time last year, the number of mortgages approved in March was lower, indicating that weaker demand is starting to emerge," he said.

The data suggest that as well as feeling the effects of the Bank of England's three interest rate rises since August last year, the widely expected 25 basis points hike forecast in the May meeting - which will put rates at 5.50% - and the likelihood of a further rise by August, is beginning to worry homebuyers.

There is also the added impact of the introduction of new government legislation on house buying which will come into effect June 1.

Home Information Packs will provide potential buyers of a property with a pack including documents with detailed information about the property which previously tended to come to light only once an offer had been made. The packs will increase the cost of selling a property and the move has likely resulted in some vendors advancing the sale of their property to avoid the new law.

"Agents have been suggesting to potential vendors that they will save money by putting their homes on the market before HIPs are introduced," said Richard Donnell, director of research for online property Web site Hometrack.

The BBA report also said consumers are continuing to reduce their unsecured debt and made a net repayment of GBP408 million in March after a repayment of GBP190 million in February.

Other unsecured lending in the form of overdrafts and unsecured loans fell GBP279 million in March, compared with a GBP63 million drop in February.