Mortgage lending dips

MORTGAGE lending slowed to its weakest pace for three years in April, suggesting hopes that the housing market slowdown had bottomed out may have been premature.

The British Bankers' Association says net mortgage lending fell by £500m during the month to £4bn, well below the six month average of £4.5bn. It was the weakest figure since February 2002, when it was also £4bn.

The BBA said weak mortgage lending was matched by subdued growth in consumer credit, with a move towards saving. Net lending on credit cards fell for the first time in 11 years, down by £40m.

The BBA had reported upward swings in lending in February and March raising hopes that the slowdown in the market had bottomed out. BBA director of statistics David Dooks said: 'The weaker recent picture of mortgage demand continued in April and tied in with other reported indicators of a slower housing market.

'Consumer credit was noticeably weak, with a rare net monthly repayment of seasonally adjusted credit card borrowing, whilst loans and overdrafts grew only slowly.'

The news on consumer credit follows remarks from Bank of England policymakers that a slowdown in spending is a key economic risk following bleak reports from major shop chains and downbeat retail surveys.

The BBA figures conflict with those released by the Council of Mortgage Lenders which said mortgage lending was up 2% in April to £21.5bn. The organisation said lending for house purchase was up strongly on March and accounted for 43% of all lending.

CML director-general Michael Coogan said: 'It now seems clear that the market has stabilised at its new lower level, and we expect to see a continued soft landing as long as the Bank of England resists any new temptation to raise interest rates.'

Howard Archer, chief economist with financial research firm Global Insight, said both sets of data reinforce the impression that a stand-off is developing in the housing market between buyers unwilling, or unable, to pay the prices being asked and sellers unwilling to drop their prices.

He said: 'This could continue for an extended period, given that very few sellers are having to sell for 'distressed' reasons, while buyer affordability seems likely to improve only gradually over the coming months.'