Mortgage approvals fall in May

May’s mortgage lending was much weaker than April and a record low number of house purchase approvals means the subdued picture will continue, according to the British Bankers’ Association (BBA). Consumer credit rose, largely reflecting lower credit card repayments and, after April’s strong inflow, personal deposit growth was weaker in May.

BBA statistics director, David Dooks, said of the latest data: “Measures of mortgage activity were lower in May as a result of tighter lending criteria and economic pressures on households. Only remortgaging business is holding up, where people need or want to take advantage of deals with other lenders. People spent more on credit cards, but repayment levels were lower than expected in May and after April’s busy month with people putting money into ISAs, personal deposits were not as strong.”

Declining approval activity during April and May gave rise to gross lending in May some 16% lower than a year earlier.

Net mortgage lending was weaker than trend in May and the smallest monthly rise (apart from last October) since 2002.

Approvals for remortgaging held up in May and remortgaging was a record 53% of all mortgages approved.

Approvals for house purchase hit a record low as they continued to be well down on the same period last year. Approvals for equity withdrawal & other purposes also continued to decline.

Annual growth in credit card borrowing increased to + 7.4% and with repayments (unusually, over the last 18 months) not exceeding spending, net lending increased sharply, after allowing for write-offs.

Annual growth in loans and overdrafts fell marginally to + 3.0%.

Personal deposits rose, but less so in May, slightly below the six-month average. This appears to be a reaction in seasonally adjusted terms after the very strong April rise, so the average of both months (+ £ 3.7bn) is a better indication of current trends.

Lending to non-financial companies was, as usual, dominated by lending to real estate companies, though the rise in May was only about half the long-term average. There was a net repayment of borrowing from the business services sector.