Aprils mortgage approval figures made for good reading showing that approvals are slowly starting to creep back up. Both the BBA and CML have recently reported that numbers were up in both March and April.
Of course we all know that these numbers are still significantly lower than the peak of the market but nonetheless they do suggest that we may have passed the worst. What concerns me is that without new money flowing into the market there simply is not enough retail and institutional deposits to fuel any meaningful increase in mortgage lending. Despite the taxpayer having pumped untold billions into the banking system ordinary people are still being starved of mortgage finance. Both sets of data whilst encouraging are still c50% down on what is considered to be a healthy market so there is still a way to go before we are out of intensive care and back to a sustained recovery.
We need some action on how mortgages are funded via wholesale markets, recently we have seen the big banks successfully tap into securitisations to release capital but this is insufficient to bring about a recovery. Also, the big banks that borrowed money from us via the Special Liquidity Scheme are wrestling with how they are going to repay that money, of which a large chunk comes due in the next couple of years. Let’s hope that whichever party gets into power next week they will have the motivation to get the mortgage market back to good health as quickly as possible.