Net mortgage lending up, say BBA

The annual growth of the banks’ net mortgage lending was 2.3% in March, remaining substantially ahead of the 0.7% for the whole mortgage market in February.

Related topics:  Mortgages
Millie Dyson
27th April 2011
Mortgages
Demand for overall unsecured credit contracted by 1.8% over the past year, but over the same twelve months, personal deposits rose by 3.7%.

mortgage lending

Gross mortgage lending of £7.7bn in March was slightly lower than the recent six month average of £7.9bn and 11% lower than gross lending in March 2010. Despite gross mortgage lending  holding up fairly well recently, this is due to stronger remortgage activity rather than new house purchases.

However, net mortgage lending increased by only £0.8bn in March, due in part to higher repayments.

number of approvals

House purchase approvals were slightly higher than in February but 10% lower than in March 2010. The average value (£145,400) was 0.5% lower than a year earlier. Numbers of remortgage approvals in March were 7% lower than the previous month but 1% higher than in March 2010.

Approvals for equity withdrawal continue to be weak and were 19% lower than March 2010.

unsecured lending annual growth rates

Demand for unsecured borrowing remains subdued, despite stronger reported retail sale volumes in March, suggesting that cash, not credit, is being used for spending. Borrowing on cards has expanded over the past two years (largely equating to the interest added to accounts, because spending is routinely offset by repayments).

New personal loans in March were marginally higher than the recent trend.

company borrowing annual growth rates

Net lending to businesses in March continued to be weak as demand remained subdued and repayments exceeded gross lending.

BBA statistics director, David Dooks said:

"Uncertainty about future prospects for the economy is a significant factor behind these statistics. Weak trading activity is discouraging businesses from borrowing to expand and most are oriented towards repaying debt and reducing their operating costs; larger corporates are also using the capital markets less.

"Householders also remain focused on paying down debt, leading to a net contraction of unsecured borrowing and low net mortgage lending, although new mortgage lending is holding up fairly well."

David Whittaker, managing director of Mortgages For Business, said:

“The mortgage market is like a kite – you can tug and pull at it all you like but nine times out of ten you need an extra pair of hands to get the thing off the ground. At the moment, despite some signs of life, the mortgage kite is firmly grounded and is in desperate need of some help to lift-off.

"There are parts of the mortgage market that are faring better than others, though. BTL products are increasing in number almost every day and the yields that can be achieved on more complex deals are astronomical, but the overall market is in dire need of a shot in the arm.

"The government’s attempts are falling flat so lenders must take the responsibility and help heal the market that so many of them relied upon three or four years ago.”   

John Mawdsley, CEO of Omnii Solutions, says:

“The mortgage market is a prisoner of the fragile economy. In the same way you can’t expect a car to start without an engine, you can’t expect massive increases in gross lending with a flat economy.

"Brokers won’t be surprised by the fall in gross lending stats – they see this on the ground every day.  The good news is that competitively priced higher LTV products appear to be making something of a comeback with a number of lenders announcing changes over the recent weeks.

"An increase in demand for the rental sector may also help stem the tide over the coming months. I am sure brokers will continue to be frustrated by a lack of availability but with the potential for a general feel good factor from the royal wedding and a string of holidays there is hope that the market will show signs of shaking off its lethargy.

"Brokers should look to the summer of 2011 with a combination of hope and enthusiasm.”

Nicholas Leeming, director at Zoopla.co.uk, said:

“There is still a lot of nervousness over the future of the economy and this is having a direct impact on the housing and mortgage markets. While falling annual house purchase approvals can be attributed to the high level of activity in early 2010, many would-be buyers are now putting off their purchases until the economy has stabilised.

"With inflation at its current level, house values are falling in real terms, discouraging sellers from putting property on the market. This is a vicious circle that is causing the market to stagnate and cannot be allowed to continue.

"Parts of the market are doing well, but for overall growth it’s up to the government and lenders to take the bit between the teeth and deliver initiatives that will make a real difference to the health of the property and mortgage sectors.”
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