The annual growth in the banks’ net mortgage lending was 2.8% in December, substantially ahead of the 0.8% for the whole mortgage market in November. Personal deposits have risen by 5.2% over the past year.
In December 2009 gross mortgage lending was inflated by borrowers bringing loans forward ahead of the increase in stamp-duty in January 2010. Though lower this December, gross lending of £7.9bn was in line with the amounts seen in recent months.
Net mortgage lending increased by £0.9bn in December, the lowest increase since June 1999. Mortgage repayments continued to be fairly strong in December reflecting more remortgage approvals in recent months.
House purchase approvals were marginally lower in December. The annual total of just under 400,000 approvals was some 10% lower than 2009. The average value of house purchase approvals (£143,300) fell slightly but was 1.6% higher than a year ago.
Numbers of remortgage approvals in December were slightly stronger than the recent six-month average but for 2010 as a whole were some 7% lower than 2009. Approval numbers for equity withdrawal loans continued to be weak and for 2010 were some 12% lower than 2009.
Numbers of credit card purchases were 5.9% lower in December compared to a year ago and were in line with reported weak retail sales volumes, partly attributed to the bad weather in December. Repayment levels were higher and more than matching new spending levels, so the stable growth in card borrowing largely reflected interest accruing. Demand for personal loans continued to be weak with new borrowing some 6.2% lower than a year earlier.
A number of sectors have shown slower contraction rates in the last few months but overall in 2010 net lending to non-financial companies continued to decline. The weaker annual growth rate for manufacturing in December largely reflected repayment of takeover finance.
BBA statistics director, David Dooks said:
"The main banks' net lending rose by £20bn in 2010, in contrast to lending by all other lenders which decreased by around £12bn. However, mortgage demand was weak throughout the year, with 10% fewer loans approved than in 2009.
"Unsecured credit demand was also weak during last year, with net lending reducing by £2bn as households adopted a lower appetite for credit due to the uncertain environment for employment and the economy."
Nick Hopkinson, Director of PPR Estates, comments:
“Any claimed growth in mortgage lending by the high-street banks last year is simply a result of them taking market share off other lenders. While the big banks are competing aggressively to lend to borrowers with perfect credit scores, huge deposits and small percentage loan requirements, the mortgage famine continues unabated for most potential homebuyers.
"Any claimed increase in finance availability from the big banks is therefore a nil-sum gain for the overall mortgage market and normal homebuyers’ perspective.
“Even from the high-street banks approvals for all types of mortgage loans continued to dwindle in December 2010. This is a depressing forward indicator for the state of the UK housing market. Regardless of borrower demand, I see no real evidence that lending availability will increase meaningfully this year against a backdrop of surging inflation, austerity cuts and a very uncertain economy.
"Mortgage rationing is now ‘the norm’ and will stay with us till the banks have discreetly rebuilt their battered balance sheets over the next few years. House prices will also remain under severe downward pressure this year.”
Simon Rubinsohn, RICS chief economist said:
"Data from the BBA shows residential mortgage approvals slipped back to their lowest point since January 2009. The decline in activity is also reflected in the negative trend in the RICS new buyer enquiries series from the monthly RICS Housing Market Survey.
"A key reason for the fall in interest from prospective purchasers is still the lack of available mortgage finance for first-time buyers. That factor is, however, being compounded by increasing concern about the economic outlook. Yesterday's disappointing GDP figure will do nothing to ease this worry.
"Meanwhile, the minutes of the December MPC meeting demonstrate the dilemma facing the authorities as inflation approaches the four per cent mark, with the split between the economics hawks and doves becoming more pronounced.
"A rate hike over the coming months would clearly be bad news for the housing market but even without an officially sanctioned move, actual mortgage costs are already beginning to creep up reflecting developments in financial markets. Against this backdrop, housing transactions are likely to remain weak over the coming months."
