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MORTGAGE LENDING RISES AT SLOWEST RATE FOR NINE YEARS (Buying)
by administrator 
, Friday, May 28, 2010, 04:48
Mortgage lending rose at its slowest rate for nine years during April as housing market activity remained subdued, British Bankers' Association figures have shown.
Net lending, which strips out redemptions and repayments, was just £1.83bn during April, the lowest level since February 2001.
The low figure did not come as a surprise as mortgage approvals have been depressed since the turn of the year due to a combination of the end of the stamp duty holiday, the severe winter weather and the uncertainty created by the general election, all of which have limited activity in the housing market.
The BBA said mortgage repayments were also particularly strong during April, as banks actively encouraged borrowers to use their spare cash to pay down their loan. But economists have speculated that the drop in lending seen this year may be down to more than these one-off factors, and could indicate that the housing market recovery has run out of steam.
Mortgage approvals for house purchase remained low during April at 35,729, up marginally on the previous month's figure, but well down on the 45,822 seen in December.
At 21,580 the number of people remortgaging was only slightly ahead of October's 10-year low, as many homeowners continued to be better off sitting on their lenders' standard variable rate, rather than switching to a new deal.
Simon Rubinsohn, RICS chief economist said: "The number of mortgage loans approved for house purchases edged up in April but still remains well down on the levels seen at the back end of last year. The unfavourable comparison is largely a reflection of the rush that took place to take advantage of the stamp duty holiday which expired on December 31st 2009.
"The subsequent decision of the previous government to introduce a new incentive for first-time buyers is likely to become increasingly visible in the mortgage data over the coming months. Indeed, the last RICS Housing Market Survey showed new buyer enquiries picking up to their best level since the end of last year.
"Moreover, the improvement was most marked in those parts of the country where potential home buyers are likely to derive most benefit from the new measure. By way of contrast, London and the South East, where the entry level for many is above the £250,000 threshold, actually saw a drop in interest in April.
"On a separate note, the BBA release also demonstrates the continuing pressure on the construction sector with lending to the industry declining once again in April. The recently released RICS Construction Market Survey highlights the lack of access to development finance as a key reason for the caution amongst industry professionals about the outlook with workloads expected to increase little over the next twelve months."
