Mortgage lending still subdued, but remortgaging is on the rise

New figures released today by the British Bankers Association (BBA) suggest that the UK mortgage and housing markets remain subdued at the beginning of 2011.

Gross mortgage lending at the main high street banks totalled £8.2billion in January - slightly higher than the recent six month average of £8bn and 2% higher than gross lending in January 2010.

Mortgage approvals for house purchase were marginally higher than in December, but they remain 29% lower than in January 2010 – this suggests that activity in the housing market will continue at its current lethargic pace for the next few months at least.

The remortgage market is showing some signs of improvement however.  Numbers of remortgage approvals in January were 5% higher than the previous month and 28% higher than in January 2010 as growing speculation of an interest rate rise led many borrowers to switch their mortgage deal to a fixed rate.

Rate rise speculation has continued this month and many lenders have been putting up the costs of their fixed rate deals so we expect remortgage numbers to remain relatively strong in February.

Today, the Bank of England released the minutes of February’s MPC meeting which showed that support for a rate rise is growing within the nine-member committee.  This month, three members voted to raise interest rates from their current all-time low of 0.5% - in January, there were two votes for a rise.

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