Mortgage lending at lowest in 8 years

Wednesday, 27 May 2009 10:46

Mortgage lending has fallen to its lowest level in eight years, as uncertainty from both lenders and borrowers remains high.

Data from the British Bankers' Association (BBA) show net mortgage lending fell to £2.7 billion in April - down 49.7 per cent on a year ago.

However, the body reports mortgage approvals for house purchases - at £3.5 billion for 27,685 deals - are starting to stabilise.

All mortgage approvals stood at £7.2 billion, down 54.4 per cent.

Remortgage approvals are down 63.0 per cent from a year ago - the lowest since 1999 as borrowers seem happy to hold on to low standard variable rates.

David Dooks, BBA statistics director, said: "The house purchase part of the mortgage market appears to have stabilised, with slightly more approvals coming through, although April's weak net mortgage lending reflects the lower number of approvals in previous months.

"Households' uncertain financial circumstances not surprisingly continue to dictate consumer behaviour, both in the housing market and in generating only low demand for new personal loans."

Andrew Montlake, director of independent mortgage broker, Coreco, said the data were an accurate reflection of the market.

"Loans for house purchases are increasing slightly as more people look to take advantage of low prices and low interest rates," he said.

"The main cause for concern is that other loans, specifically remortgages, continue to decline as people take a 'wait and see' approach."

He warned for those at higher loan-to-values this could prove very costly.

"The general consensus is that fixed rates are as cheap as they are likely to get, with lenders anxious to keep their margins high in order to claw back some much needed profit," Mr Montlake said.

"Once a rise in rates comes, and it will come, for many it could be too late."

The BBA data also showed for a second month new spending on credit cards matched repayments, while new personal loans issued fell 39.3 per cent over the year to £1.5 billion.

Savings levels rose in April, but the BBA warned the overall trend continues to decline.

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