MortgagesMortgage approvals recovered slightly last month after plunging to an 18-month low, Bank of England figures showed.

There were 47,312 approvals for house purchase in July worth £7.1 billion, an increase on just over 44,000 in June, which was the lowest figure in a year and a half.

But analysts said that weak credit growth is likely to continue to act as a "brake on the economy" for some time, despite the Bank of England and the Treasury's recently-launched funding for lending scheme to unclog the flow of credit.

The latest mortgage approval figure remains below the more than 50,000 approvals seen in May and the funding for lending scheme has not stopped Nationwide and Santander announcing mortgage rate increases.


Borrowers have faced a tougher time trying to take out a mortgage in recent months as lenders generally have been tightening their borrowing criteria, causing a drop in the proportion of mortgages approved.

The figures also showed that remortgaging approvals were slightly up in July, with 25,273 approvals worth £3.4 billion, although like the house purchase figures, remortgaging approvals were lower than those seen in May.

Samuel Tombs, an economist for Capital Economics, said: "While the number of mortgages approved for new house purchase rose from 44,124 to 47,312, this only reversed about half of the fall in June and left approvals still some 8% below the average level seen in the previous 12 months.

"Looking ahead, credit might have become easier to obtain now that the funding for lending scheme is up and running. That said, the scheme has not prevented some lenders from increasing their borrowing rates recently. Indeed, we think that weak money and credit growth is likely to act as a brake on the economy for some time to come."

Research from comparison website MoneySupermarket recently found that the choice of mortgages for first-time buyers and people with deposits of 10% or less has shrunk back significantly in the last six months.

Jonathan Harris, director of mortgage broker Anderson Harris, said: "It is too early to say what impact the funding for lending scheme will have. There are fewer deals available at higher loans-to-value than a year ago, so this needs urgently addressing if it is to be a success and to give the housing market the kickstart it so desperately needs."

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