Mortgage approvals jump 24%

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Lenders approved a quarter more mortgage applications last month than in May 2012.

According to figures published by the British Banker’s Association (BBA), the number of mortgages approved by banks in the three months to May rose from 32,952 to 36,102, a much higher figure than the 33,100 expected.

Remortgaging in May was also up 17% on May 2012. The BBA claims that mortgage lending is likely to increase further over the summer thanks in part to the government’s Funding for Lending and Help to Buy schemes.

The Funding for Lending scheme introduced last September allows lenders to borrow money from the government at very low interest rates, on condition that they then lend the money on to consumers at lower rates in mortgages and business loans.

This scheme has been widely attributed with bringing about the ‘mortgage price war’ which has seen the cost of borrowing for down this year for homebuyers and remortgagors.

Help to Buy, which was introduced in April, offers interest-free equity loans worth 20% of a property’s value to purchasers of participating new-build homes, be they first-time buyers or existing homeowners.

A second part of the Help to Buy scheme, a mortgage indemnity guarantee aimed at encouraging lenders to offer more mortgages at higher loan-to-values, is planned for January 2014.

It is hoped that this will boost mortgage lending yet further.