The Bank of England announced on Monday that UK mortgage lending rose by its weakest margin on record in May and mortgage approvals were steady but weaker than that expected.

They said mortgage lending rose by £324m in May, a third of the level in April and a tenth of that a year ago. That was the weakest increase since comparable records began in April 1993.

The number of mortgages approved numbered 43,414 in May, just up from 43,191 in April, weaker than analysts’ forecasts for a reading of 46,000 and still pointing to house price falls ahead.

The BoE’s preferred measure of broad money supply growth, which excludes other financial corporations, was unchanged on the month, perhaps as companies paid down debt rather than invested in their business.

The figures show that credit remains tight and as such will likely add to expectations that the recovery from recession will be a protracted one.

The pressures of recession have forced 64%of  people to reassess their life priorities over recent months, yet the majority are taking precious little action to protect and provide for the things they love most.

The LV= ‘Look After What You Love Index’ tracks people’s key life priorities and how their financial concerns and actions match up to these. The research reveals that the pressures of recession have forced nearly two thirds (64%) of people to reassess their life priorities over recent months, with spending ‘quality time’ with loved ones, plus family and personal health now top of the list.

However, in spite of people’s clear focus on the simple priorities in life, the LV= study shows the majority are taking precious little action to protect and provide for the things they love most. Whilst maintaining current income is the nation’s fourth highest priority, and one in three (33%) fear this could be impacted by the financial crisis, just 4% of adults say they have taken out their own insurance to replace their income if they were to become ill and unable to work. Moreover, only a third of adults (33%) have savings on deposit to act as a safety net and a quarter (25%) have cut their insurance or started using their savings to help make ends meet.

Mike Rogers, LV= group chief executive, said: “Rather than doing away with valuable insurance or eating into savings, it is important for people to take stock of their financial situation. Everyone can take some financial steps, however small, towards protecting the things they love most in life. For example, insuring the breadwinners in the family for loss of income will make only a modest impact on most people’s finances, yet can provide vital assistance if the worst should happen.”

Over 30 % of UK estate agents have said they’ve seen around a 10% increase in properties coming onto the market, in comparison to the start of the year.

The survey conducted by the National Association of Estate Agents revealed further optimism in the recovery of the housing market and one in six agents reported up to a 20% increase.

Gary Smith, president of the NAEA, said: “Since the beginning of the year NAEA members have seen a significant increase in demand. There are clearly plenty of buyers out there. Last month the NAEA registered an average of four buyers for every available property.

“However the vast majority of these buyers also become sellers and these up-to-date figures show that as these buyers decide on a property the supply of housing will increase.

“It is another positive indication that the UK housing market is over the worst and the NAEA calls on the Government to further badger banks and building societies to respond to the opportunity to pull the situation around.”

Two of the largest mortgage lenders in the UK have changed their lending criteria to make it tougher for would be buyers to secure a mortgage.

Royal Bank of Scotland, which is mainly owned by the |british taxpayer, has tightened lending criteria on what new applicants can consider as their annual income.

They will now only consider 25 % of annual performance-related bonus, which has to be an average over two years.

Bonus payments made up of shares will also be excluded. The crackdown on bonuses payments follows similar moves by other lenders, including Nationwide Building Society and First Direct.

Abbey, who are now the second biggest lender in UK, is clamping down on erroneous applications which have come via mortgages brokers. It has ruled out reviewing any applications from customers who were rejected for a new loan because of errors or spaces on the form.

A spokeswoman for Abbey said: “We are getting a high volume of applications through mortgage brokers which are incomplete or contain incorrect information. Consumers should work closely with their financial adviser to ensure that all relevant details and information required to submit a complete application are available to their broker.”

Melanie Bien, director of Savills Private Finance, the broker, said: “Despite talk of ‘green shoots’ of recovery, lenders continue to demonstrate a reluctance to lend by tightening criteria further still.

“When it is some of the bigger lenders who are adopting this approach, borrowers may wonder where they are supposed to go to get accepted for a mortgage.

“While market conditions may be improving and the bottom of the market seems to be in sight, lenders still haven’t regained their appetite for lending. If this situation does not change, it will hamper recovery.”

Yesterday, Halifax, Britain’s biggest lender, pushed up the cost of mortgage deals for existing customers by up to 0.75 percentage points, following a similar move affecting loans for new customers last week.

A five-year fixed-rate deal for homeowners borrowing up to 90 per cent of a property’s value was raised from 5.24 per cent to 5.99 per cent, although the fee was cut from £1,249 to £999.

An RBS spokeswoman said: “We continue to consider bonus payments in the assessment of income. We constantly review our internal guidelines to ensure the amount of previous discretionary bonuses eligible for consideration is appropriate to the current economic outlook, recognising our duty as a responsible lender and our customers needs.”

The Organisation for Economic Cooperation and Development says the world economy is near the bottom of the hardest recession since war time.

30 of the  most industrialised nations which the OECD represent says those economies will contract by just over 4% this year and recovery is likely to be “weak and fragile,” The BBC reports.

The UK’s output is set to drop by 4.3% in 2009, worse than its previous forecast of a 3.7% fall, says the organisation. 

It predicts zero growth in the UK economy in 2010 and says the UK budget deficit will reach 14% next year, worse than Government had previously estimated.

The OECD says the pace of the global downturn is now moderating after the sharp drop in the six months to March, yet it still predicts output will shrink by 2.2% this year.

However, the OECD has revised its overall economic forecast upwards, especially in 2010, for the first time in two years.  It says the economies of Japan and the US are expected to decline less sharply than projected in its previous report.

With advanced economies will return to weak growth of 0.7% in 2010, compared with its previous forecast of a contraction of 0.1%,”it looks like the worst scenario has been avoided,” the OECD says.

“Even if the subsequent recovery may be slow, such an outcome is a major achievement of economic policy,” it adds.

However, it is more pessimistic about the UK and the eurozone’s prospects as “signs of impending recovery in the euro area are not yet clearly visible,” due to housing bubbles, damage to the financial sector and export set backs.

The OECD also warns rising public sector deficits in the UK will need to be reined in as recovery takes hold.  It urges the Government to develop a “concrete and comprehensive plan” to ensure debt is on a deteriorating path.

Despite mortgage approvals rising the BBA said that the mortgage market remained subdued.

Net new mortgage lending of £2.3bn in May, was again at its lowest level since March 2001, having fallen from £2.5bn in April.

BBA statistics director David Dooks argued that High Street banks were loosening their lending constraints and offering mortgages to people who did not have a large deposit to give.

But he said that consumers’ appetite to borrow had been hit by uncertainty over jobs, house prices and the state of the economy in general.

This also meant that demand for new loans was contracting, and spending on credit cards was down 11.4% on a year ago.

With interest rates still at a record low, the number of people remortgaging has continued to fall. Approvals were down 60% to 24,847 in May as many householders simply stuck with their lenders’ variable rates.

Low interest rates - with the Bank rate still at 0.5% - were also hitting savings, with the BBA seeing a low level of new deposits being made by customers, who are likely to be searching elsewhere for higher returns.

The Council of Mortgage Lenders forecasts  gross mortgage  lending in 2009 to remain the same, at 700,000 transactions and £145 billion of gross lending.

Net lending however appears less negative and the CML now expects net lending to reduce by around £5 billion, compared with the £25 billion previously forecast.

While market conditions remain extremely challenging, existing borrowers are gaining some significant benefits from the effect of lower interest rates. This factor, taken together with the significant levels of forbearance being shown by lenders and the government’s interventions to improve support for some struggling home-owners, has resulted in the CML reducing its forecast for repossessions for this year from 75,000 to 65,000. The CML now also expects around 360,000 mortgages to be in arrears, equivalent to 2.5% or more of the mortgage balance by the end of the year.

The CML observes that: “The raft of measures taken by the authorities have stabilised the economy and will sow the seeds for a recovery over time, including in the housing market. But the improvement is likely to be slow and drawn out, especially as the extensive fiscal, monetary and credit support measures are gradually unwound.”

Mortgage lending fell again in May. Latest figures show  from the Council of Mortgage Lenders.

Gross lending amounted to £10.3bn, which was down 2% on April and 58% lower than in May last year.

They said that lending for new  home buyers had risen recently, lending to people remortgaging had sloped off.

Surveys conducted by the Halifax and the Nationwide had suggested the slump in house prices may be tailing off.

But the CML put a dampener on proceedings by stating they did not expect  a significant recovery in sales in the next few months.

“Lending volumes appear to have stabilised at extremely low levels, but the weak labour market and lenders’ limited access to funding will constrain activity for some time yet,” said CML economist Paul Samter.

“Underneath the headline gross lending figure, it’s likely that a moderate improvement in house purchase lending in May has been offset by very low remortgaging volumes as borrowers stay with existing deals.”

According to the latest information  from the Council of Mortgage Lenders, almost 70% of mortgages taken out in April were fixed-rate deals – the highest share since June 2008 – at an average rate of 4.83 per cent.

Bob Pannell, head of research at the CML, said: “With the interest-rate cycle now at its floor, an increasing proportion of borrowers are taking out fixed rates, including for longer periods of five to 10 years. With the expectation that rates will remain low in the near future, shorter term fixes are less appealing than attractively priced variable-rate deals.”  

Ray Boulger from John Charcol, said: “If interest rates continue to rise, the current recovery in the housing market – which is based primarily on improved affordability – may wobble. The message for borrowers wanting to take a fixed rate is clear; get in now or miss out on the relatively low rates.”

Nationwide, Cheltenham & Gloucester and Northern Rock were first to raise rates on their fixed mortgages, following  increases in swap rates, upon which fixed rate mortgages are based. Other lenders are expected to follow suit shortly.

Melanie Bien, director of independent mortgage broker Savills Private Finance, said: “Fixed rates are starting to rise and are certainly not going to get any cheaper, so if you need the security of knowing your monthly payment, now may be the time to consider a fix.”

First Direct is offering the lowest fixed rate on the market, charging borrowers 2.99 per cent for two years. The deal is available up to 75 per cent LTV (loan to value). Loans can be between £30,000 and £400,000. There is a £499 booking fee and a £999 arrangement fee.

If you are looking to fix for longer, Chelsea Building Society is offering the lowest three-year fixed rate, charging 3.84 per cent until June 30 2012. The deal is available on advances of between £60,000 and £500,000, up to 65 per cent LTV. There is also a £995 arrangement fee.

Ms Bien said: “If you can fix for five years at around 5 per cent, that’s an excellent deal. Consider fixing for five years rather than two. The problem with a shorter fix is that when you remortgage, rates will be higher so it could turn out to be expensive. A longer fix will see you through the worst interest-rate volatility.”

Yorkshire Bank and Clydesdale Bank are offering a five-year fixed rate of 4.99 per cent. The deal is available up to 80 per cent LTV on advances over £25,000. First-and second-time buyers will be required to pay a £999 arrangement fee.

Customers looking to fix their rate for 10 years can get 4.99 per cent from Abbey. The deal is available on advances of between £6,000 and £250,000 up to 75 per cent LTV and borrowers will be required to pay a £995 arrangement fee.

The best deal for customers with a deposit of just 10 per cent is from Britannia Building Society, which is offering 5.09 per cent. The deal is available of advances of between £5,000 and £500,000 and is subject to a £599 arrangement fee.