This takes the value of the approvals down to £7.7bn from £8.1bn in January.
Despite recent LMS figures to the contrary, the number of remortgages approved was up to 26,711 from 25,783 in January however that was below the six month average of 27,741.
The bank's gross lending figures also showed a £0.9bn rise in loans secured on properties compared with an average monthly increase of £0.4bn over the previous six months.
Gross lending hit £12.8bn in February and was not quite offset by £12.6bn in mortgage repayments.
Andy Knee, Chief Executive of LMS, comments:
“The latest Bank of England lending statistics shows that although the number of approvals over the past month has remained reasonably constant, there has been a shift in emphasis within the market.
“The number of approvals for house purchase has fallen considerably, whilst the number of approvals for remortgaging has seen an increase. This rise is most likely due to the significant number of excellent value deals for those with low LTVs that are currently available for remortgagers.
“Although this is good news for the remortgage market, these figures underline the need for the Government’s Help to Buy scheme, which is due to be introduced later this week.”
Howard Sears, MD of venture capital firm Astuta, commented:
"These figures lay bare the gulf between the banks' rhetoric and the reality. They confirm that bank lending to business continues to fall at an alarming rate.
"The banks claim they are ready and willing to lend. But the fact remains the conventional credit pipeline for businesses is badly blocked. This cannot just be explained away by falling demand for credit from businesses.
"While it's true that SMEs in particular are giving up on approaching their bank for finance, the banks themselves are systematically withdrawing credit facilities from long-standing and successful business customers.
"As a result many firms are increasingly seeing their relationship with their bank as a loveless marriage - and are seeking alternative sources of finance.
"But the banks are doing nothing to help themselves. Unless a company has substantial assets and security, its chances of getting bank finance are slim.
"If the sputtering economy does slip into the feared triple dip recession, banks will have to accept a large portion of the blame for starving businesses of the oxygen of finance."
Chris Love, a director at independent mortgage broker, Mortgage Simplicity, said of the figures:
"This latest data from the Bank of England underlines just how dysfunctional the mortgage market still is.
"The sharp fall in loan approvals for house purchase during February is a stark reminder of how the mortgage and property markets remain volatile, constrained by both strict lender criteria and low consumer confidence.
"You can't do anything about weak demand but there is certainly room for improvement in lender criteria, which in many cases remain excessively harsh.
"Perfectly viable borrowers are still being turned down for perfectly affordable mortgages.
"There's no doubt that the Funding for Lending Scheme has brought down rates but the barrier to entry to the overall market remains high.
"At lower loan-to-values, the rates can be exceptional, while at higher loan-to-values the challenge is still getting accepted. Lenders are being forensic.
"While the number of remortgages rose during February, strict criteria and in many cases diminished equity are still preventing many people from switching to a more competitive loan.
"Looking further into 2013, the worry is that the £25bn gap the Financial Policy Committee wants plugged could see the number of mortgages fall further. If banks have to bolster their capital bases, it's hard to believe they won't reduce the number of mortgages available."
Peter Williams, Executive Director of IMLA, comments:
“Today’s Bank of England figures show that, while the overall value of mortgage lending rose in February, the only modest increase in activity levels was seen in the remortgage arena. With house purchase approvals lagging behind January’s total, and below the six month average, it is clear that better rates alone will not be enough to boost house purchases in significantly larger numbers.
“Many lenders are understandably cautious about relaxing their borrowing criteria, which is one reason why the Funding for Lending Scheme is yet to have the scale of impact that was hoped. If it is implemented effectively, the new Help To Buy mortgage guarantee will encourage higher loan to value lending, but there are eight long months before this comes into play and there are lots of operational details still to settle.
“Expanding the First Buy equity loan scheme to all new home buyers in the meantime will certainly help to boost the number of mortgage approvals. But with new build homes in short supply, we must hope that it also encourages house builders to increase output to meet the extra demand.”
Brian Murphy, head of lending at Mortgage Advice Bureau, commented:
“Today’s figures back up the theory that homeowners seeking better remortgage deals have been making the most headway since the turn of the year. Interest has been sparked by some of the best rates we have seen in the market for a long time, which along with seasonal factors explains the monthly increase in both the volume and value of remortgage approvals.
“The fact that overall mortgage approvals slipped again – with house purchase approvals down for the second successive month – shows how important it is to encourage more activity in this area. The equity loan aspect of Help to Buy will certainly help, but we must hope that the January 2014 launch for the mortgage guarantee scheme does not mean people hold back on home purchases before then.
“It is vital that the Treasury and Bank of England keep homebuyers firmly in mind if they extend or adjust the Funding for Lending Scheme, rather than switching their attention to small businesses.”
