Mortgage approvals in December remain static

The latest Trends in Lending figures from the Bank of England show there were 106,399 mortgage approvals in December, up only slightly on the 104,856 in November.

Gross lending secured on dwellings was £13.0bn in December, up £0.7bn on November and higher than the previous six-month average of £11.9bn.

While the number of loan approvals for house purchase – 52,939, was broadly unchanged in December and was higher than the previous six-month average of 51,192.

The number of approvals for remortgaging, 32,422, also increased in December and was broadly in line with the previous six-month average of 32,858.

While the number of approvals for other purposes, 21,038, was little changed in December, and was also broadly in line with the previous six-month average of 20,728.

Richard Sexton, director of e.surv chartered surveyors, says the market has shown remarkable resilience so far, but sterner tests are to come in the following months.

He says: “The UK economy is teetering on the brink of a second recession, and lenders’ confidence is taking a hit because of the absence of a solution to the financial crisis in Europe.

“There are well-founded fears of a serious credit crunch, which could force lenders firmly back within their shells. Banks are already under pressure as funding becomes harder, and this will inevitably feed through into the mortgage market.

“With their more cautious approach, banks won’t be in a position to lend more, particularly to first time buyers. Loan-to-values are already showing signs of dropping this year, after a steady increase in 2011, as mortgage lenders once again tighten their deposit requirements and rein in their lending to lower income buyers.

“With credit so restricted, and likely to become more so, banks will look to meet their targets by lending more to wealthier buyers and buy-to-let investors.”