A 10% reduction on the £2.2 billion lent in September, but broadly similar to the average of £2.0 billion over the preceding three months. Mortgage approvals fell by 8% in October to £1.8 billion from £1.9 billion in September.
Adrian Coles, Director-General of the BSA, said:
“Lending activity across the market has shown signs of weakening in recent months. Although lending by mutuals fell in October, gross lending remains similar to the average over the preceding three months. Reports of falling house prices and government spending cuts have lowered consumer confidence which has put further downward pressure on demand for mortgages.
“An encouraging trend in recent quarters, however, has been the growth in mortgage approvals at mutuals and this may lead to some recovery in mutuals’ market share over the next few months.”
Savings balances held at mutuals decreased by £1.1 billion in October, following a decrease of £0.6 billion in September. Excluding interest credited to accounts £1.3 billion was withdrawn in October, compared to £0.8 billion in September.
Commenting on the savings data Coles said:
“The current economic climate is proving challenging for households. Consumer price inflation remains above average earnings growth and the labour market remains fragile. This is squeezing household finances and many are using their savings to supplement their incomes or to pay off debt. The low interest rate environment is also proving a continued challenge to attract savings.”
Mutual statistics October 2010:
- Mutuals’ gross lending amounted to £1,964 million in October 2010 compared to £2,176 million in September.
- Net lending by mutuals in October 2010 was -£290 million compared to -£11 million in September.
- Mortgages approvals by mutuals in October 2010 were £1,760 million compared to £1,912 million in September.
- Savings balances at mutuals decreased by £1,118 million in October 2010, compared to a decrease of £568 million in September.
- Mutuals had a net withdrawal from savings accounts of £1,310 million in October 2010 compared to a net withdrawal of £819 million in September.
- Mutuals had a net withdrawal of £94 million from Cash ISAs in October 2010 compared to a net receipt of £194 million in September.
Richard Sexton, business development director at e.surv said:
“At first glance, this looks bad. Approvals have been low for months and now they have fallen even further. But if you compare approvals with property values, it becomes clear that this isn’t the whole story. Approvals are actually up for the most expensive properties.
"Wealthy buyers are using large deposits to side-step lending restrictions. The flip side is that approvals for cheaper properties have fallen dramatically. This shows the market is being driven by the behaviour of lenders, not buyers.
"Lenders are concerned by their liabilities under the Special Liquidity and Credit Guarantee schemes, and by the arrival of Basel III – we may have to wait for those developments to be worked through before we can see strong house price growth again.”
