Mortgage approvals weaken in the face of rising costs and prices

February’s gross mortgage lending was £14.9bn, 7% more than the £14.0bn in February 2006. In line with seasonal patterns, February was well down on January’s £16.6bn, according to the British Bankers’ Association (BBA).

There were 167,000 mortgages approved (for all purposes) in February. Earlier house purchase approvals data have been re-stated from last month’s release to allow for the one-off cancellation of about 5,000 approvals in January. The average loan approved for house purchase was £150,400, some 14% higher than a year earlier. It has taken just under 4 years for the average loan size to rise from £100,000 to £150,000, having taken around 9 years to double from £50,000 to £100,000.

Underlying net mortgage lending (gross lending minus repayments and redemptions) rose by £5.2bn, less than the recent average of £5.7bn and January’s increase of £5.4bn. The annual growth in net mortgage lending continued at around 14%.

Credit card borrowing was unchanged in the month, while other loans and overdrafts fell by £0.2bn.

David Dooks, BBA director of statistics, said: “The UK’s shortage of housing market supply is clearly evident in the mortgage approvals data. The last £50,000 rise in the average house purchase loan has occurred more than twice as quickly as the previous £50,000 increase. Demand appears to be moderating however, as the monthly number of house purchase approvals was lower than a year earlier for the third month running and net lending was below trend in February.

Reflecting tighter conditions for personal disposable income, consumer credit continues to be weak.”

Mortgage Lending

When compared to February 2006, house purchase approvals were down 5% by number though up 8% by value; remortgaging approvals were up 6% by number and up 22% by value; and approvals for equity withdrawal were unchanged by number but 10% higher by value.

Consumer Credit

New borrowing on credit cards totalled £6,224mn in February; 7% lower than February 2006. After seasonal adjustment, underlying net lending decreased by just £4mn.

New lending on personal loans and overdrafts in February was also lower than February 2006 and after seasonal adjustment, net lending fell by £183mn compared with a recent monthly average rise of £225mn.