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Net borrowing rises in July but approvals plummet

The Bank of England has unveiled an increase in net lending to individuals in July, rising from £3.1bn in June to £3.2bn July 2008.

But this figure is still well below the six month average of £5.6bn.

New mortgage approvals continued to head south, falling from £4.9bn in June to £4.3bn. This is well below the previous six month average of £7.8bn.

Remortgage approvals also fell sharply in July, dipping from £10.9bn in June to £9.5bn. In real terms, it means there were some 11,000 less remortgage approvals in July than there had been the previous month.

Nicholas Leeming, director of Propertyfinder.com, says: “People do want to move home, and buyer interest is high as they search for bargains.

“But a lack of mortgage finance has put the brakes on transactions. However willing they may be, the majority of people can’t move because they can’t get a mortgage.”

While Libor rates are falling and bank balances look more stable, he says most lenders are still refusing to loosen their criteria.

He adds: “Lenders must start to act more competitively and the Bank of England should be taking action to encourage them.

“Base rate reductions are no longer the answer but the Bank should be taking further steps to improve liquidity in the capital markets.”

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