Gross mortgage lending at lowest level since 2001

Gross mortgage lending of £7.6bn in October, was the lowest total since February 2001, the latest figures from the British Bankers’ Association show.

Gross lending was 16.1% lower than a year ago, but net mortgage lending increased by £1.7bn in October compared to £3.0bn in the same month in 2009.

The annual growth in the banks’ net mortgage lending was 3.5%.

The average value of house purchase approvals, £144,900 rose in October and is 2% higher than a year ago.

Numbers of remortgaging approvals in October were stronger than the recent six-month average while those for equity withdrawal remained weak.

David Dooks, statistics director at the BBA, says: “Activity in the mortgage and consumer credit markets continued to be subdued in October, reflecting uncertain prospects for households and lower consumer confidence.

Paul Diggle, property economist at Capital Economics, says with both lenders and borrowers still facing significant challenges, a recovery seems a long way off.

He says: “The BBA’s figures show that the number of loans for house purchase fell by 292 loans, from 31,058 last month to 30,766 in October. That is a touch weaker than the unchanged number of approvals for house purchase in last week’s Trends in Lending data, but the differences are small.

“House purchase approvals on the BBA measure are now almost 15,000 per month lower than their December 2009 high.”

He says overall, the negatives will outweigh the positives.

Diggle adds: “The supply of credit will remain tight as lenders face further funding pressures, including the approaching deadline to begin repaying funds borrowed under the Special Liquidity Scheme.

“And mortgage demand will remain subdued next year as the fiscal contraction bites, recent employment gains go into reverse and the consumer spending recovery comes to a sharp halt.

“To our minds, this suggests that mortgage approvals will remain well below a more normal, pre-recession level for at least the next 12 months and possibly for much longer than that.”