Weaker mortgage outlook

The value of September’s gross mortgage lending at £18.5bn was only 3% higher than in September last year, according to the British Bankers’ Association (BBA).

Underlying net mortgage lending (gross lending minus repayments and redemptions) rose by £5.8bn. This was between August’s increase (+£6.1bn) and the recent average (+ £5.6bn) and leaves annual growth still at around 14%.

In September there were 160,879 mortgages approved (12.1% fewer than in September 2006) with an aggregate value of £18.1bn (5.8% lower than last year). The average loan approved for house purchase was £152,300, some 8% higher than a year earlier.

Credit card borrowing rose by £0.1bn (net) in the month, the same as borrowing on personal loans and overdrafts.

David Dooks, BBA director of statistics, said: “Lower amounts of new mortgage lending and fewer loans approved for house purchase signal a weaker outlook for the mortgage market, particularly if loan supply reduces in the aftermath of the recent financial markets difficulties and borrowing costs remain at current levels.

Despite reports of stronger retail sales, card spending was low in September, but so were repayment levels, giving rise to a small increase in net borrowing alongside a similar rise in loans and overdrafts, but overall demand for unsecured borrowing remains very weak.”

Mortgage Lending

When compared to September 2006, house purchase approvals were down 27% by number (the lowest September number since 2000) and 21% by value; remortgaging approvals were up 7% by number and up 14% by value; while approvals for equity withdrawal were down 14% by number and down 7% by value.

Consumer Credit

Spending on credit cards totalled £6,725mn in September 3% less than in September 2006. However after allowing for weaker repayments and seasonal adjustment, underlying net lending increased by £70mn.

New lending on personal loans and overdrafts in September was 2% lower than in September 2006 but after seasonal adjustment, loan and overdraft lending rose by £114mn net.