The annual growth in the banks’ net mortgage lending was 3.5% in October, substantially ahead of the 0.8% for the whole mortgage market in September. Demand for unsecured credit overall remained weak, contracting by 1.7% over the past year, however credit card borrowing saw a slight increase in October. Personal deposits have risen 4.8% over the past year.
Mortgage lending
Gross mortgage lending of £7.6bn in October, the lowest total since February 2001, was 16.1% lower than a year ago. Net mortgage lending increased by £1.7bn in October compared to £3.0bn in the same month in 2009.
Number of approvals
House purchase approvals were marginally lower in October, reflecting weak mortgage
market activity. The average value of house purchase approvals (£144,900) rose in October and is
2% higher than a year ago.
Numbers of remortgaging approvals in October were stronger than the recent six-month average while those for equity withdrawal remained weak.
Unsecured lending annual growth rates
Numbers of credit card purchases remained the same as September, just above the six-month average, despite the slight drop reported in retail sales volumes. Repayment levels are holding up and more than matching new spending levels, so the stable growth in card borrowing largely reflects interest accruing.
Demand for personal loans continued to be weak, with new borrowing 6.7% lower than a year earlier.
Company borrowing annual growth rates
Some sectors are showing slower contraction rates in October but overall, growth rates for lending to non-financial companies remained weak. Reports suggest credit availability continues to improve for businesses with sound balance sheets. Larger companies are also using the equity and bond markets as an alternative source of finance.
BBA statistics director, David Dooks said:
“Activity in the mortgage and consumer credit markets continued to be subdued in October, reflecting uncertain prospects for households and lower consumer confidence.
“Credit availability for viable businesses has improved, so a continued contraction in net lending growth reflects repayment behaviour, particularly by larger companies.”
Richard Sexton, business development director at e.surv said:
“The weakness in the mortgage market reflects both nervousness among potential buyers and also more restrictive credit conditions among lenders. But beneath the surface there is a real two-speed market in operation.
"Approvals are actually up for the most expensive properties – wealthy buyers are using large deposits to side-step lending restrictions, and they are more likely to be in parts of the country, like prime London, which have been more insulated from wider market weakness.
"The flip side is that approvals for cheaper properties have fallen dramatically. It’s hard to foresee a significant improvement in mortgage lending, however, while banks are focused on the withdrawal of the Special Liquidity Scheme, the end of credit guarantees and the arrival of Basel III. Add sovereign defaults into the mix and lenders are likely to be pretty risk averse for a while, leaving hopeful mortgage borrowers out in the cold.”
Chris Gardner, a director at Obligo, said:
"In recent months there has been a steady but very noticeable decline in the number of mortgage applications.
"If it's not concerns about their livelihoods that's holding people back, in many cases they are not even bothering to apply for a mortgage, as they feel their chances of getting accepted are just too slim. This is particularly the case with people in need of higher LTV loans.
"Although lenders highlight the growing number of products available on the market, in reality these products are variants of the same lower LTV offerings. The breadth of products is still very limited.
"In certain cases, reduced uptake is due to lenders' overreaction to regulatory developments. When the FSA announced it was looking at self-cert and interest-only, these products all but disappeared even though we are merely at the consultation stage. Borrowers are nervous for obvious reasons but so are lenders from a regulatory perspective and this is reducing product diversity."
