The British Bankers’ Association (BBA) reports that 37,200 new home loans were approved in July, marginally below the 17-month high in June of 37,337.
Mortgage approvals for home buyers are up by 31 per cent on 12 months ago and remortgaging approvals have seen a 40 per cent rise.
However, because of the bigger repayments made by borrowers to increase equity during a time of low interest rates, overall borrowing is “subdued”, the BBA said.
July and August normally see a slowdown in activity in the property market during the summer lull, so the very small fall seen in July after a strong month in June is encouraging and more evidence of the revival in the housing market.
Mortgage rates are at historical lows and opportunities for first-time buyers to get on the property market have been helped by government schemes such as Finding for Lending and Help to Buy.
With savings rates extremely low and mortgage rates very competitive, consumers have been opting to pay down mortgage debt rather than save.
BBA statistics director David Dooks said: "Mortgage activity has strengthened during 2013 with the help of Government schemes but high repayments and redemptions mean, however, that we are not seeing increases in net mortgage borrowing for the high street banks."
Figures for high street banks were positive but lending to businesses remain stagnant, according to new data by the British Banker’s Association (BBA).
Personal deposits rose by five per cent over the 12 months leading to July 2013, while gross mortgage borrowing was up from £9 billion in June to £9.1 billion the month after. With major government initiatives, such as the Funding for Lending and Help-to-Buy schemes, it is no surprise therefore that mortgage activity has risen.
Jeremy Duncombe, director for Legal & General Mortgage Club, said: “It’s a sure sign of improved confidence in the market that lenders have a bigger appetite to lend, and it’s a great time for the consumer to take advantage of historically low rates in the knowledge that Mr Carney expects rates to remain low for some time to come."
However, it was not all good news as repayments and redemptions have still stunted net mortgage borrowing, with this falling by £0.1 billion in July and net lending to non-financial businesses falling by a mammoth £3.3 billion.
Duncan Kreeger, director of peer-to-peer bridging lender West One Loans, noted: “Half a decade of banks plodding along in first gear is not progress. Growth in UK businesses will have suffered as a result of the withdrawal of more than £3 billion pounds in support – at exactly the time when they need to invest in the future. It’s very difficult for SMEs to expand without investment, no matter how successful they are."
Mr Kreeger stressed the importance of such small businesses that will lead economic recovery, but high street banks still remain a large obstacle in plans for expansion. He added that this may be why alternative financing is growing at such a quick pace, with peer-to-peer lending potentially being worth billions of pounds in the near future.
Twitter: My Finances
Join the conversation at #news_myfinances