Mortgage lending down again

Tuesday, 25 November 2008 01:00

Mortgage lending fell again in October and home loan approvals are now down 60 per cent from last year.

The British Bankers' Association (BBA) said just £2.8 billion of house purchase loans were approved in October, down 59.9 per cent from last year.

The number of loans approved was also lower, down 16.3 per cent.

A report from former HBOS chief executive Sir James Crosby revealed yesterday that net mortgage lending is likely to fall below zero next year, as redemptions and repayments outstrip lending.

Sir James has called on the government to intervene in the mortgage market to prevent a prolonged fall in house prices but yesterday the chancellor said there would be a delay in implementing the recommendations.

Oliver Gilmartin, senior economist for the Royal Institute of Chartered Surveyors, said: "News that mortgage lending took a turn for the worse in October with an eight per cent monthly decline comes as little surprise, given the backdrop of rising unemployment and fragile confidence."

Unsecured lending was also weak, the BBA said, with spending on overdrafts down and the amount borrowed on personal loans 26.3 per cent lower.

Although consumers are cutting back on credit, fewer are saving, according to the figures.

Personal deposits were flat in October, after a spike in September, and remained at £1.1 billion.

BBA statistics director, David Dooks, said: "Mortgage approvals remained low, consumer credit was subdued and people used their deposits to fund spending in October."

However, loans to financial companies were sharply higher over the month.

Lending to financial companies shot up to £49.7 billion from a previous six-month average of £13.2 billion.

• Tags:
• cheap mortgage
,
• news