RTTNews - Though net mortgage lending showed its weakest flow on record in May, the increase in house price approvals reported by major lenders in June signal that activity may continue to strengthen in the months ahead, a central bank report said Monday.

According to the Lending Panel data in the Bank of England's latest Trends in Lending report, the number of mortgage approvals for house purchase reported by six major UK lenders rose to 51,100 in June from 45,000 in May. Approvals climbed for the fifth month in a row and is the highest since the series began in December 2008.

The Lending Panel was established by the Chancellor in November 2008 to monitor lending to the UK economy. The panel data constitutes data collected from Banco Santander, Barclays, HSBC, Lloyds Banking Group, Nationwide and Royal Bank of Scotland.

The major UK lenders reported a further rise in approvals for house purchase in June, suggesting that mortgage lending for house purchase may continue to strengthen in coming months, the report said.

Gross mortgage lending for house purchase by the major UK lenders rose to GBP 4.7 billion in June from GBP 4.3 billion in May, the report showed, the highest since the series began in January 2009.

Separately, data released by the the Council of Mortgage Lenders showed that gross mortgage lending in the UK rose 17% month-on-month to GBP 12.3 billion in June. However, gross mortgage lending was 48% lower than the same month last year.

According to CML economist Paul Samter the pick-up in June's lending was largely due to seasonal factors, and these may well support lending volumes at moderately higher levels over the rest of the summer.

But the combined effects of the restricted nature of mortgage funding, reduced number of active lenders, weak labor market and limited consumer demand are likely to hold back any significant and underlying improvement.

CML left its gross mortgage lending forecast for the year unchanged at GBP 145 billion.

The central bank report said fixed mortgage rates increased in June, partly mirroring the rise in swap rates. Fixed rate mortgages accounted for around 70% of new mortgages in May, the report said, maintaining the borrowers' bias to the same since the start of the year.

Some major UK lenders have reported that signs of stabilization in housing market activity and prices, and the margins prevailing on higher LTV products, have slightly increased their appetite to lend at higher LTVs.

Loan to value ratio or LTV is the ratio of outstanding loan amount to the market value of the asset against which the loan is secured, normally residential or commercial property. The quoted interest rate on two-year fixed mortgages with a 75% LTV rose to 4.47% in June from 3.98% in May.

Earlier in the day, data from the property website Rightmove revealed that house prices in the U.K. increased in July as buyer activity remained strong on rising confidence that the market has passed the bottom. house prices rose 0.6% in July from the previous month compared to a 0.4% fall in June. After rising 0.6%, average asking prices totaled GBP 227,864 in July.

Overall, net consumer credit remained weak in May. Excluding credit cards, net consumer credit turned positive for the first time since December 2008.

None of the major UK lenders reported any plans to expand the availability of consumer credit, and they had yet to detect any significant signs of an increase in demand, the report said. Lenders also said they are yet to detect any significant signs of an increase in demand for personal loans.

Lending to businesses were subdued as funds raised by businesses from banks and capital markets remained weak. Going forward, some lenders expect the stabilization in the economic outlook, as well as slightly more plentiful and cheaper funding, to help them make credit more available over the next three months.

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