Historically, the difference between gross lending and capital repayment produced positive net lending data each month. However, with lower levels of gross lending and high capital repayments being maintained in the light of low interest rates, net lending has gradually reduced to a flat balance.
The number of mortgages approved for house purchase showed a continued upturn in November and appear to be returning to the levels seen a year earlier. The average house purchase approval rose slightly to £154,200.
Numbers of approvals for remortgaging and other secured lending continue to be lower than in previous years, reflecting the lower activity levels in the housing market. The current average total of 63,000 approvals a month compares with 230,000 a month in the peak year of 2003.
Cash ISA inflows continue to be strong this year as households have sought accounts paying better rates of interest, leading to a rise in all personal deposits of 6.3% over the year to November.
BBA statistics director, David Dooks said:
“November saw new mortgage borrowing of £7.7 billion and personal loans of £1.1 billion, with monthly credit card spending higher at £7.3 billion, resulting from above average transaction volumes. Households are, however, continuing to repay virtually as much as they borrow and, as people hold onto cash, deposits are growing by 6% annually.
“The situation is not dissimilar in the business world - businesses are holding back investment or expansion plans and building up cash reserves."
Mark Blackwell, managing director of xit2, property data specialists, comments:
“The mortgage market hasn’t returned to its former glory by any means, but there have certainly been signs of life towards the end of 2012. The Funding for Lending Scheme has helped lenders circumvent some of the difficulties in the funding markets, and many consumers have felt the benefit, filtering through into a modest improvement in lending. But it won’t be a silver bullet for the mortgage market next year.
"Banks are still getting a handle on their balance sheets, and are taking a cautious approach to new lending - minimising their exposure to less wealthy borrowers and those without substantial deposits. This is likely to place a ceiling on any improvement in the number of new mortgages doled out in 2013. The CML’s optimistic £156 billion prediction can only try to encourage a more buoyant market, which still feels like it’s moving but moving in a much lower gear.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, says:
"Gross mortgage lending edged higher in November but the trend towards paying off the mortgage continues. Lack of consumer confidence, caused by weak economic growth in the UK and the ongoing eurozone crisis, mean most homeowners feel more comfortable paying down their debt than increasing their liabilities. In an uncertain world, it makes sense to take control where you can, and for many, that is by reducing the levels of debt they are exposed to.
"Record low interest rates have resulted in some of the cheapest mortgages we have ever seen so it is no surprise that lending volumes are slowing ticking up month by month and that the year has seen stronger lending volumes than initially forecast.
"However, the biggest barrier to home ownership remains the deposit as first-time buyers struggle to drum up the tens of thousands of pounds required to get on the housing ladder. Funding for Lending should make this easier next year, resulting in more choice at higher LTVs and better rates. It is no overnight solution but a slow burner, yet early signs are encouraging."
