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UK mortgage approvals post slowest decline in 2 years

THE number of UK home loans approved in April fell at its slowest annual rate in almost two years, the British Bankers' Association said today, in a sign the housing market may be stabilising after a very sharp slide.

The BBA said the number of mortgages approved for house purchase rose to a seasonally adjusted 27,685 in April from 26,671 in March.

That was down 15.5 percent on the year, the smallest annual decline since August 2007, when the credit crunch hit and the housing market started to come off the boil.

The BBA said its figures suggested the mortgage market may be stabilising.

However, analysts cautioned that lending conditions remained tight, despite record low interest rates and the Bank of England's efforts to pump money into the economy, and that the housing market was still a long way from recovery.

"The improvement is from a such a low base and the fact that approvals haven't really increased at all this month is a worrying signal of credit conditions," said Seema Shah, property economist at Capital Economics.

The BBA figures showed net mortgage lending rose by 2.7 billion pounds (US$4.33 billion) compared with a downwardly revised 3.4 billion pound rise in March -- the smallest increase in 8 years. The average value of the loan stood at 129,100 pounds.

Recent housing market surveys have suggested that interest from prospective homebuyers may be improving as Britons slowly regain confidence in the economic outlook. House prices also seem to be falling at a slower rate than last year.

However, banks remain cautious about lending while the economy remains deep in recession and unemployment is climbing, and this could hamper a pick-up in housing market activity.

The BBA said the number of re-mortgaging approvals fell to 25,418 last month, down 63 percent on the year and its lowest since December 1999. Approvals for housing equity withdrawal were down nearly 39 percent on the year to 19,409.

"The data reinforce our belief that the pick up in housing market activity will be gradual and fitful for some time to come given ongoing very poor economic fundamentals and still tight credit conditions," said Howard Archer, economist at IHS Global Insight.


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