Mortgage lending hits five-year low

THE NUMBER of people taking mortgages to buy homes tumbled 15% between November and December, new figures show today. Mortgage approvals fell from 47,245 to 40,201, the lowest level in five years.

The figure represents a 38% fall on a year earlier, said the British Bankers' Association (BBA). Approvals for remortgagaing were 15% down on a year earlier and even equity withdrawal, which has enjoyed a boom in recent years, saw a 34% slump.

'This time of year sees a seasonal weakness in loan demand,' said David Dooks, director of statistics. 'With approval volumes running well below those in the same month a year earlier, mortgage lending is expected to remain relatively subdued in the near-term.'

Fears have been mounting for the health of the UK property market. Earlier this week a study from research firm Hometrack said house prices had been falling for seven months, although a rival study from Nationwide showed a pick-up during January.

'The level of approvals over recent months suggests that house price inflation should continue to fall back gradually, not abruptly,' said George Johns, economist at Barclays Capital.

The BBA said the average value of a loan for homebuying fell to £118,100 from £120,100 in November but was still 10% up on a year before.

Growth in lending on credit cards and personal loans continued to slow 'in line with weak retail sales', said the BBA. The increase in borrowing on loans and overdrafts, up £400m, was lower than the monthly average of £500m. Credit card borrowing, up £300m, was a little stronger than November, but still lower than the average monthly rise of £400m over the past half-year.

'The modest growth in banks' consumer credit lending over the month reflected the apparent weakness in consumer sentiment suggested by December's retail sales index,' Dooks said.

The detailed figures supplement headline statistics published by the BBA last week. They showed underlying mortgage lending climbed £5.2bn in December, although much of the rise was put down to a new industry rules delaying some November lending.