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Ratio of approvals that advance is falling, says CML

The Council of Mortgage Lenders says the proportion of approvals leading to cash advances changes significantly with market conditions.

It says the time lag between the approval and advance stage can vary depending on factors, including lender process, type of loan, borrower requirements and purchase complexity.

The research found that from 1998, the proportion of approvals that converted to advances gradually declined and stood at 93 per cent in 2002, meaning that around 7 per cent of recorded net approvals failed to translate to advances.

This is likely to be partly related to the buoyancy in the market and will also depend on the type of loan, specifically whether it relates to remortgaging.

The research found some evidence that the proportion of loans that convert from approvals to advances dec-reases as market activity inc-reases. This could be due to increased competition among housebuyers which may res-ult in gazumping.

Another factor could be sellers pulling out if they believe that re-marketing a property will result in a higher price. This trend could also relate to the increase in loans with flexible features, in particular a drawdown facility.

CML spokesman Bernard Clarke says: “Approval data can be a useful indicator but the relationship is not straightforward. It does not follow that approval figures can be relied upon to make a hard and fast prediction about advances.”


The personal touch

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