Mortgage recovery 'unrealistic'
A recovery in mortgage lending is "unrealistic", banks warned today, as the recession mutes consumer demand for debt.
Data from the British Bankers' Association (BBA) out this morning show mortgage lending in March were marginally weaker than in February.
The statistics show remortgage lending is now a third of the level in April 2008, as homeowners look to stay on lenders' low standard variable rates rather than lock into new deals.
Lending for home purchases is now down 39 per cent on a year ago and down 67 per cent on the July 2007 peak.
March saw 26,097 home purchase mortgages approved and 26,831 remortgage deals cleared - less than half the level seen in 2007 at the peak of the boom - and down 25.3 per cent and 58.4 per cent respectively on a year previously.
Gross mortgage lending - recorded at £8.9 billion - was down 47.2 per cent on a year ago.
BBA statistics director David Dooks said: "Lending to households continues to grow, as banks make funds available for people who meet their lending criteria but consumer confidence is fragile and unlikely to change demand markedly in the near-term.
"The banks' figures also show it would be unrealistic to expect the mortgage market to recover in a steady and consistent way in the current economic environment."
The figures reveal a £3.7 billion mortgaging lending net change in March, compared to £3.9 billion in February and a peak of £6.2 billion in August 2007.
Spending on credit cards was down 9.3 per cent on a year ago to £6.1 billion, but repayments fell 11.2 per cent.
Lending on loans was down 43.6 per cent on a year ago.
Howard Archer, chief UK economist at IHS Global Insight, explained the weak March BBA mortgage data suggests the recovery for the housing market will be long.
"The relapse in the BBA mortgage data for March highlight the fact that the most likely scenario is that the pick up in housing market activity will be both very gradual and prone to relapses given still very poor economic fundamentals and relatively tight credit conditions," he said.
"Soaring unemployment, muted wage growth, a suspicion that house prices still have some way to fall, and an unwillingness of many people to commit to buying a house when they are so worried about the outlook are all factors that are likely to continue to weigh down on the housing market for some time to come."
He went on to predict house prices to fall a further 15 per cent from the current levels - bottoming out in mid-2010 and leaving them 35 per cent down on the summer 2007 peak.
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