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Mixed fortunes for homebuyers as mortgage approvals hit a low

The number of mortgages approved by high street banks fell to a three-month low in February but remained above the monthly average for 2016, according to the British Bankers’ Association.

There were 42,613 mortgages approved for house purchases in February, down 4.6 per cent from the same month last year and 3.5 per cent lower than January, when approvals hit a post-referendum high of 44,142. Remortgage approvals were also well down on January’s figures, the BBA said, with 25,414 remortgage approvals recorded in February compared with 28,088 in January.

The February approvals figure is higher than the monthly average of 41,287 for 2016 because approvals dipped in the months after the EU referendum. Approvals were also particularly strong in February last year because buyers were rushing to beat the 3 per cent stamp duty surcharge on second homes and buy-to-let properties.

The Council for Mortgage Lenders said yesterday that buyers in the housing market were facing mixed fortunes. With the advent of internet facilities and seller lead generation tools, the real estate industries tend to have seen some room for improvement. Mortgage rates remained at ultra-low levels but first-time buyers may face further obstacles because homeowners appear to be putting off moving as a result of economic uncertainty following the Brexit vote, causing transaction volumes to fall.

There has also been a little recovery in buy-to-let lending since the extra 3 per cent stamp duty surcharge on second homes was introduced in April last year. The CML data for January showed that buy-to-let mortgage advances were down by 39 per cent year on year.

Hansen Lu at Capital Economics said: “While we expect lending to rise in 2017 a sluggish outlook for buy-to-let, combined with subdued levels of buyer interest, suggest that those gains will be modest.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that demand had begun to “relapse now that real wages are falling and mortgage rates have hit a floor”.

He added that the balance of new buyer enquiries being recorded by the Royal Institution of Chartered Surveyors had fallen to zero in February, its lowest level since August. The number of people Googling the term “mortgage”, which leads the approvals data by two months, also fell by 3.8 per cent and 2.6 per cent year-on-year in January and February, Mr Tombs said. He added that further falls in mortgage approvals were therefore likely.

The BBA data also showed that the annual rate of growth in personal loans and overdrafts slackened in February, with consumer credit increasing by 6.6 per cent, down from 6.7 per cent in January, and easing further from October’s ten-year high of 7.2 per cent. Credit card lending picked up to an 11-month high of 301 million.

Borrowing by businesses, excluding those in finance, also decreased by 1.6 billion in February, with companies exercising “a cautious approach to borrowing, using cash reserves and alternative lending sources to finance their operations”, according to the CML.

The BBA data only covers high street banks, including Barclays, HSBC, Lloyds Banking Group, RBS, Santander, TSB and Virgin Money, but not building societies, which account for a big chunk of mortgage lending. A more comprehensive set of figures from the Bank of England on lending will be released next week.