The number of mortgage approvals granted to home buyers reached a five and-a-half-year high in September, the Bank of England has said.
The figures are further evidence that the housing market revival is continuing to gather pace following the launch of various Government schemes to improve mortgage access for aspiring buyers who have struggled to get a deal since the credit crunch struck.
Some 66,735 mortgages worth £10.1bn were approved for house purchase in September, marking the highest number seen since February 2008, the Bank’s figures showed.
But experts pointed out that, despite the uplift, approvals are still only running at around two-thirds of the level seen before the financial downturn.
The Bank’s latest figures were recorded just before a new phase of the Government’s flagship Help to Buy scheme was launched.
The new initiative, which has been signed up to by lenders representing most of the mortgage market, offers state-backed home loans to both first-time buyers and home movers with deposits as low as five per cent.
State-backed lenders Royal Bank of Scotland (RBS), NatWest, Halifax and Bank of Scotland started offering loans under the new phase of Help to Buy this month and HSBC, Santander and Barclays also plan come on board at a later date. Some analysts have said that the rates on products unveiled so far under Help to Buy are not much different from deals already on the market.
They have pointed out that would-be borrowers will still need to meet tough criteria to show they can pay back their loans.
There are also signs of lenders outside the new phase of Help to Buy increasing competition by cutting mortgage rates on low-deposit products.
Last week, Britain’s biggest building society Nationwide reduced mortgage rates on offer for people with deposits of between 10-20 per cent and said that first-time buyers will continue to receive a £500 discount on some product fees.
Other schemes such as Funding for Lending, which was launched last year and gives lenders access to cheap finance to help borrowers, have also added fuel to the mortgage price war seen in recent months.
Rising demand from potential buyers in the housing market has put an upward pressure on house prices and led to some fears that a “bubble” could be created.
Land Registry figures yesterday showed that house prices in England and Wales were up 3.4% on a year earlier, to make an average property worth more than £167,000.
In London, prices have surged by more than 9% year-on-year, although in the North West they have risen by just 0.6 per cent.
In another sign of how demand is hotting up, property analyst Hometrack reported yesterday that the typical percentage of the asking price buyers are willing to pay has risen to 95.2 per cnt – which is just half a percentage point off an all-time high seen at the height of the property boom in 2007.
Samuel Tombs, an economist at Capital Economics, said the Bank’s latest mortgage approval figures “are still close to 40 per cent down on their typical pre-recession levels”.
He said: “These figures are too early to reflect any boost to mortgage demand from the second stage of the Help to Buy scheme, which began in early October.
“But 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.”
The bank’s figures also showed that credit card lending rose by £151m in September, while personal loan and overdraft lending rose by £26m.
The bank said both these figures are in line with their six-month averages.
Howard Archer, chief European and UK economist for IHS Global Insight, said these figures suggest that people are still “wary” about taking on more debt, despite signs of improving consumer confidence in the economy.