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Gross lending falls 13.5% year-on-year

Gross mortgage lending of £7.8bn in November was 13.5% lower than a year ago, show the latest figures from the British Bankers Association.

Net mortgage lending amongst high street banks increased by £1.5bn November, the lowest increase since August 1999, compared to £3.4bn in the same month in 2009.

The annual growth in the banks’ net mortgage lending was 3.2% in November, substantially ahead of the 0.8% for the whole mortgage market in October.

House purchase approvals were marginally lower in November.

The average value of house purchase approvals, £145,000, rose slightly in November and was 1.9% higher than a year ago.

Numbers of remortgage approvals in November were stronger than the recent six-month average as an increased number of borrowers switched lenders when rolling over fixed rate loans.

Approval numbers for equity withdrawal loans continued to be weak.

There were 74,306 mortgage approvals in November, up from 73,475 in October.

But approvals for house purchase dropped to 29,991 from 30,689 in October.

Ed Stansfield, chief property economist at Capital Economics, says: “Approvals for house purchase dropped to their lowest level for twenty months. With lenders’ funding issues set to persist, if not intensify, there is little prospect of a mortgage market revival in 2011.

“Within the total, there was a strong rise in the number of approvals for remortgage. At 27,000, they were last higher in July 2009 and they have risen by around one-quarter in the past five months. One interpretation of that rise could be that a degree of competition has returned to some parts of the mortgage market.

“However, new mortgage approvals for house purchase, a better measure of housing demand, fell from 30,689 in October to 29,991 in November, a 2.3% decline.”

He says although small, the latest drop in mortgage approvals for house purchase is nevertheless a concern given the weak starting point. Approvals for house purchase have fallen in six of the past eight months and have now reversed more than half of the gains that were made during 2009.

He adds: “With the economic recovery set to lose momentum next year and the labour market now showing signs of renewed weakness, it is perhaps not surprising that buyersremain nervous, especially as house prices look unsustainably high.”

David Dooks, statistics director at BBA, says: “ Remortgaging with banks was strong in November as borrowers chose to replace maturing fixed-term mortgages.

“Credit card purchases were fairly strong in November in line with retail sales but repayments also kept up, so the annual growth rate for credit card lending was slightly lower.

“Lending to non-financial companies showed its first net increase since February, partly reflecting finance for takeover activity.”

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