Mortgage lending continues to slow

November’s mortgage lending rose more slowly than in October and approvals were again low, according to the British Bankers’ Association (BBA). Unsecured lending remained subdued and personal deposits showed only modest growth. Lending to companies was lower than the recent trend.

BBA statistics director, David Dooks, said of the latest data: “Mortgage activity is notably lower than this time last year and, as we expected, lending has begun to slow down. Judging by the significantly lower number of mortgage approvals in October and November - partly resulting from lower demand, partly from tighter supply – the market is likely to continue slowing in the coming months. Tighter household finances and uncertainty in the financial markets are driving consumer behaviour. Deposits are weak and unsecured borrowing remains subdued, despite a marginal rise in November.”

As expected, gross mortgage lending was weaker in November and, as approvals remained low, this weaker picture is likely to be maintained in the coming months.

Although net mortgage lending was weaker in November, the overall picture of monthly lending growth has dipped noticeably towards the bottom of the range (minimum + £4bn, maximum + £6bn over the last 3 years).

House purchase approval numbers in November were similar to October’s record low, as pressures on household finances and other factors combined to suppress demand. Approvals for remortgaging rose slightly, and continue to account for an historically high share of all approvals as customers seek
alternative deals. Loans approved for equity withdrawal and other purposes continued to decline gently.

Annual growth in credit card borrowing continued at +4.6%, but repayments continue to outstrip
new spending as they have done for most of 2007 and transactions numbers in November were a little stronger than average.

Annual growth in loans and overdrafts has fallen to +4.3%, having been near 10% at the start of the year. New unsecured lending was slightly stronger in November.