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Banks Continue Mortgage Rationing

Wed, 05 May 2010

The Bank of England has revealed a slight increase in the number of mortgage approvals in March. Home loan approvals rose from 46,882 in February to 48,901 in March - a 17 per cent increase on the same month in 2009. Despite the increase, however, mortgage lending remained cautious in the first quarter, with the lowest number of approvals in the first quarter of any year, with the exception of 2009.

Meanwhile, consumers are continuing to use their money for purposes other than saving, as building societies saw a net £318 million withdrawal of funds from savings accounts, largely owing to the paltry interest rates being offered. It is the twelfth time in thirteen months that savers have withdrawn more than they have deposited from their savings accounts, as consumers look to repay debts and mortgages rather than letting their money stagnate in low interest savings accounts or ISAs .

The requirement of considerable deposits is seen by many as the main reason for the low number of mortgage approvals, with many banks still demanding deposits of at least 25 per cent. Mortgage rationing could take a while to improve, with banks set to repay the £300 billion in owes the government as of 2011.
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