UK mortgage lending weak in December

December’s mortgage lending continued to be relatively weak 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 above the recent trend.

BBA statistics director, David Dooks, said of the latest data: “Mortgage lending weakened notably in the second half of 2007 as the credit crunch impacted on banks’ ability to lend. At the same time, demand for mortgages also softened in the face of increased borrowing costs and lower disposable income. The combination of these factors is resulting in the marked market slowdown and weakness in house prices we are now seeing.

Reports of high street sales over the Christmas period were mixed, but our figures show consumer borrowing to have been muted in December.”

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

Net mortgage lending continued to be weak in December and the overall picture of monthly lending growth has dipped towards the bottom of the range (minimum + £4bn, maximum + £6bn) over the last 3 years.

House purchase approval numbers in December were at a record low, as pressures on household finances and other factors combined to suppress demand. Approvals for remortgaging rose slightly and now account for 44% of all approvals as customers seek out alternative deals. Loans approved for equity withdrawal and other purposes continued to decline gently.

Annual growth in credit card borrowing rose slightly to +5.2%, but repayments continue to outstrip new spending as they have done for most of 2007 and transactions numbers in December were weaker than average.

Annual growth in loans and overdrafts rose slightly to +4.5%, having been near 10% at the start of the year. New unsecured lending was little changed in December.

Although still weak in comparison with historic trends, inflows to current, deposit and savings accounts were slightly stronger in December.