The Bank of England mortgage lending figures are at their highest for more than five years. Photograph: Yui Mok/PA
Mortgages approved by British lenders jumped to their highest level for more than five years in September, fanning fears the housing market was already heating up even before the latest government support kicked in.
Banks, building societies and other lenders approved 66,735 mortgages in September, the biggest monthly total since February 2008, before the global financial crisis took hold.
The figures, from the Bank of England, were just ahead of City forecasts of 66,000 and compared with an upwardly revised 63,396 in August. Mortgage approvals are seen by economists as a good early indicator of where the housing market is headed.
They follow government data on Monday showing house prices rose in every English region in September and are likely to be seized on by those who argue that the government's Help to Buy scheme risks creating a new bubble.
"All the stimulus thrown at the housing market risks starting another dangerous boom-bust cycle," said Rob Wood, chief UK economist at Berenberg Bank.
"The key issue is not where prices are today, rather it is where they will be in a couple of years. Prices and activity are rising fast now. We expect house prices to rise 10% year on year next year … The measures that selectively boost the housing market, like the Help to Buy scheme, should be scrapped."
The plan to kickstart the property market and help homebuyers struggling to get on the property ladder gives a taxpayer-backed guarantee to lenders offering 95% mortgages that are open to first-time buyers and home movers on newbuild homes worth up to £600,000. Despite criticism from the International Monetary Fund and many economists, the scheme was expanded this month.
In an attempt to quell criticism of his scheme, the chancellor, George Osborne, recently asked the Bank of England to monitor its impact and report back in a year. Howard Archer, economist at IHS Global Insight, said the latest numbers underlined the need for policymakers to be ready to act "quickly and decisively if signs of the housing market overheating become increasingly widespread and pronounced".
Archer said it appeared a number of factors were supporting the property market even before the latest phase of Help to Buy was launched: improved consumer confidence, higher employment and extended low mortgage interest rates, the first stage of Help to Buy and the Funding for Lending scheme – a Bank of England initiative to increase the flow of cheap finance to credit-starved businesses.
"We are currently a long way off from an overall housing market bubble emerging. Nevertheless, there is a mounting danger that house prices could really take off over the coming months, especially if already significantly improving housing market activity and rising buyer interest is lifted appreciably further by the Help to Buy mortgage guarantee scheme," Archer added.
Others argued the housing market was still well below its peak and there were few warning signs of a bubble forming.
"Given
that interest rates on Help to Buy mortgage products look expensive and
lending criteria are strict, we doubt the scheme will boost mortgage
demand much. Note too that banks appear to have little appetite to
substantially increase the size of their mortgage books," Tombs said.
"For now, then, there remains little evidence that a renewed boom in the housing market is developing."
The Bank data contained some evidence that businesses found it easier to get finance in September. After dropping sharply in August, lending to non-financial businesses rose by £720m, the biggest increase since January.
"While it is important not to read too much into one month's figures, the size of the September increase in business lending reported by the Bank of England provides a significant boost to hopes that banks are now becoming more prepared to lend to businesses, given the improved economic situation and outlook," said Archer.
The Bank's data showed, however, that within the overall rise, lending to small businesses fell in September.
The British Chambers of Commerce said small businesses needed more help to get funds.
"It's good to see overall business lending rise, as this has an impact on business confidence. Yet these new figures show that while large firms have little difficulty tapping debt markets, SMEs – and particular young, fast-growing firms – continue to struggle to access growth capital," said Adam Marshall, its director of policy and external affairs.
"Both policymakers and financial institutions need to do more to help fast-growing SMEs access finance."
Article Source: http://www.theguardian.com/business/2013/oct/29/mortgage-approvals-february-2008-help-to-buy
Banks, building societies and other lenders approved 66,735 mortgages in September, the biggest monthly total since February 2008, before the global financial crisis took hold.
The figures, from the Bank of England, were just ahead of City forecasts of 66,000 and compared with an upwardly revised 63,396 in August. Mortgage approvals are seen by economists as a good early indicator of where the housing market is headed.
They follow government data on Monday showing house prices rose in every English region in September and are likely to be seized on by those who argue that the government's Help to Buy scheme risks creating a new bubble.
"All the stimulus thrown at the housing market risks starting another dangerous boom-bust cycle," said Rob Wood, chief UK economist at Berenberg Bank.
"The key issue is not where prices are today, rather it is where they will be in a couple of years. Prices and activity are rising fast now. We expect house prices to rise 10% year on year next year … The measures that selectively boost the housing market, like the Help to Buy scheme, should be scrapped."
The plan to kickstart the property market and help homebuyers struggling to get on the property ladder gives a taxpayer-backed guarantee to lenders offering 95% mortgages that are open to first-time buyers and home movers on newbuild homes worth up to £600,000. Despite criticism from the International Monetary Fund and many economists, the scheme was expanded this month.
In an attempt to quell criticism of his scheme, the chancellor, George Osborne, recently asked the Bank of England to monitor its impact and report back in a year. Howard Archer, economist at IHS Global Insight, said the latest numbers underlined the need for policymakers to be ready to act "quickly and decisively if signs of the housing market overheating become increasingly widespread and pronounced".
Archer said it appeared a number of factors were supporting the property market even before the latest phase of Help to Buy was launched: improved consumer confidence, higher employment and extended low mortgage interest rates, the first stage of Help to Buy and the Funding for Lending scheme – a Bank of England initiative to increase the flow of cheap finance to credit-starved businesses.
"We are currently a long way off from an overall housing market bubble emerging. Nevertheless, there is a mounting danger that house prices could really take off over the coming months, especially if already significantly improving housing market activity and rising buyer interest is lifted appreciably further by the Help to Buy mortgage guarantee scheme," Archer added.
Others argued the housing market was still well below its peak and there were few warning signs of a bubble forming.
Samuel
Tombs, UK economist at the thinktank Capital Economics, emphasised that
mortgage lending, at £1bn, was only "a touch" above the average of
£0.7bn over the previous two years. Mortgage approvals were still close
to 40% down on their typical pre-recession levels, he added.
"For now, then, there remains little evidence that a renewed boom in the housing market is developing."
The Bank data contained some evidence that businesses found it easier to get finance in September. After dropping sharply in August, lending to non-financial businesses rose by £720m, the biggest increase since January.
"While it is important not to read too much into one month's figures, the size of the September increase in business lending reported by the Bank of England provides a significant boost to hopes that banks are now becoming more prepared to lend to businesses, given the improved economic situation and outlook," said Archer.
The Bank's data showed, however, that within the overall rise, lending to small businesses fell in September.
The British Chambers of Commerce said small businesses needed more help to get funds.
"It's good to see overall business lending rise, as this has an impact on business confidence. Yet these new figures show that while large firms have little difficulty tapping debt markets, SMEs – and particular young, fast-growing firms – continue to struggle to access growth capital," said Adam Marshall, its director of policy and external affairs.
"Both policymakers and financial institutions need to do more to help fast-growing SMEs access finance."
Article Source: http://www.theguardian.com/business/2013/oct/29/mortgage-approvals-february-2008-help-to-buy
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