Demand for mortgages likely to fall as BBA points to a lacklustre July

Gross mortgage lending at banks was £8.4bn in July, slightly below the previous six-month average of £8.6bn, the British Bankers’ Asso-ciation reports.

Net mortgage lending by high street banks increased by £2bn in July compared with hikes of £2.1bn in June and £2.2bn in July 2009.

Annual growth in banks’ mort-gage lending was 4.1%- 0.9% above the whole mortgage market in June.

The BBA statistics show that the abolition of Home Information Packs has had no obvious impact on house purchase approvals, which declined in July.

The average value of house price purchase approvals was £148,500, slightly down on June but 4.6% higher than a year ago. Remort-gaging approvals stood at 21,908 and equity withdrawals at 18,221, and both were at similar levels to June and the previous six months.

David Dooks, statistics director at the BBA, says: “Gross mortgage lending remains stable, although demand for mortgages continues to be subdued.

“The greater availability of properties for sale and slowing house price growth have not yet fed through to increased house purchase approvals.”

Ed Stansfield, chief property economist at Capital Economics, says that the figures show that growing pressure on household finances, rising fears about job security and tight lending criteria are depressing activity in the housing market.

He says: “The renewed weakness of mortgage demand in 2010 has been a key factor in explaining why the pace of house price rises has slowed sharply since the turn of the year and, on some measures, has begun to go into reverse.

“In the near term, there seems to be little prospect of approvals breaking out of their recent de-pressed range.”

Stansfield adds that the latest drop in buyer enquiries reported by the Royal Institution of Chartered Surveyors in July points to weaker rather than stronger mortgage demand in the months ahead.