In graphs: UK mortgage approvals on the increase

Billy Ehrenberg
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Mortgage approvals for June beat expectations (Source: Getty)

The number of mortgage approvals rose in June despite tighter lending restrictions and indications that the housing market might be cooling slightly.

Analysts had expected a slight fall and a total number of 41,375.

Instead, the seasonally-adjusted data from the British Banker's Association (BBA) shows that the number of approvals for house purchases was up very slightly from 41,881 to 43,265, arresting a slide that began in January.

Overall, gross mortgage borrowing for June was £11.2m, 24 per cent higher than June last year. The year-on-year rise is partly down to a rise in average loan amount and partly down to the number of approvals, both indicating the growth in the market in the last 12 months.

The first graph shows the evolution of the volume of mortgages, as more people feel financially secure enough to buy a new home. Unless otherwise stated the figures are seasonally adjusted. This means that statistical techniques have been applied to remove any disruption caused by predictable seasonal trends.

It is also important to note that the BBA does not represent all mortgage lenders but only around two thirds. As a result, this data is an interesting guide but not a definitive indicator.

Since September 2007 when the number of approvals started to slide, we have seen a big dip followed by a more gradual recovery. As you'd expect, the overall value of mortgage approvals has risen as well and the trajectory roughly follows the number of approved loans.

The average value of an approved loan for house purchase is a bit harder to compare to the other two. While the overall value and volume of loans are seasonally adjusted figures, the average loan amount is not. This makes the line look artificially volatile, and means it is harder to see the trend.

The general consensus seems to be that it's too early to tell if new mortgage restriction regulations are affecting the market and if the upturn will be sustained.

In its report, the BBA said:

Having declined during the early months of 2014, approval volumes turned up in June, in the aftermath of the implementation of the Mortgage Market Review, which might have slowed down processing of applications in the earlier part of the year.
BBA's chief economist Richard Woolhouse commented said that observers shouldn't jump to conclusions as to the causes of recent trends.

These figures show that mortgage approvals are rising again after four months of decline. That's encouraging because those decisions are a leading indicator of what's happening in the housing market.

But the jury is still out on exactly how the new rules are affecting customer applications or approvals.

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