Mortgage lending improves slightly

Tuesday, 24 November 2009 11:54

Gross mortgage lending in the UK improved marginally in October, according to the latest figures from the British Banker's Association (BBA).

It said mortgages for house purchase, as opposed to remortgaging, rose to £6.1 billion from £6 billion the previous month, while gross mortgage lending - which includes remortgage activity - had mirrored the trend rising to £9 billion last month compared to £8.9 billion in September.

However, this equated to a total of 165 more mortgages approved in October compared to the previous month.

While the lending figure for October was slightly higher than the previous month, it was still some 20% lower than a year ago.

The BBA warned gross lending would continue to be weak in the absence of increased remortgaging activity, which is down some 61% on this time last year.

The annual growth rate of 4.6 per cent in banks' mortgage lending did however substantially exceed growth of just 0.8 per cent for September across the whole market.

BBA statistics director, David Dooks, said: "The longer it takes to emerge from recession, the longer we will see households and businesses continue to borrow with caution. The banks' mortgage lending, still growing by more than 4 per cent a year, shows one aspect of consumer behaviour but unsecured borrowing is subdued and people are building up deposits.

"A mixture of lower business demand, alternative corporate funding and tighter lending conditions, all giving rise to the on-going contraction in lending to non-financial companies, is a reflection of current market conditions."

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors said the BBA's data was broadly consistent with the conclusions of the Bank of England's recently published Trends in Lending predictions.

He added: "Although the availability of finance for homebuyers has increased a little in recent months with some evidence of a modest relaxation in the strict control on loan to value ratios for first -time buyers, access to the property market still remains challenging particularly given the rebound in residential prices in recent months.

"That said, the lack of supply of property coming onto the market is proving to be an increasingly important obstacle to a more meaningful pick-up in transaction levels.

"Inevitably, the number of new instructions will remain fairly subdued into the year end but it is crucial that more fresh stock is placed with agents in the early part of 2010 to give the market a further boost. More importantly, this is critical to preventing a further sharp upward move in house prices."

• Tags:
• mortgage levels and takeup
,
• news