Weak monthly rise for net mortgage lending

Net mortgage lending of £2.3bn by the banks was the weakest monthly rise since early 2001, according to statistics from the British Bankers Association (BBA).

Net lending is now running at a level which is nearly half the long-term monthly average before 2008. Gross lending dropped to its lowest monthly figure since February 2001 largely due to much weaker remortgaging in recent months.

However, the value of loans approved for house purchase rose, reflecting some improvement in lenders ability to lend. Although the numbers of approvals for remortgaging and other purposes are lower than a year earlier, the trends appear to be stabilising at current levels. Lending to financial companies rose marginally while lending to non-financial companies was little changed overall.

David Dooks, statistics director at the British Bankers Association (BBA), says: "Steady monthly increases since last November have seen the number of loans approved for house purchase recover to levels seen in early 2008, although gross and net mortgage lending show a subdued wider mortgage picture. However, unlike much of the mortgage market, the high street banks are still seeing lending growth and improved mortgage availability is reflected in higher average loan approval values."

He adds: "Consumers' borrowing appetite remains weak, reflecting uncertainty over household circumstances, so credit growth is negligible and spending activity on credit cards is down on this time last year. Lending to non-financial companies was little changed overall in May."

Simon Rubinsohn, chief economist at Royal Institute of Chartered Surveyors (RICS) says the fact that the number of mortgages approved for house purchase climbed to its best level since April last year means the housing market improved in May.

He says: "This pick-up in demand is broadly consistent with the rise in buyers enquiries signalled in the monthly RICS housing market survey. Indeed, the continuing strength of the latter series suggests that property transactions could rise a little further over the coming months."

IFAonline