Mortgage approvals weakened in March

All measures of the banks’ mortgage lending in March were marginally weaker than in February, according to the British Bankers Association (BBA). Overall consumer credit was little changed and personal deposits remained weak. Lending to non-financial companies fell by about £1.0 billion, largely reflecting the unwinding of takeover finance.

BBA statistics director, David Dooks, said of the latest data: “Lending to households continues to grow, as banks make funds available for people who meet their lending criteria but consumer confidence is fragile and unlikely to change demand markedly in the near-term. The banks’ figures also show it would be unrealistic to expect the mortgage market to recover in a steady and consistent way in the current economic environment.

“Company demand for increased bank finance is subdued, as large corporates seek alternative funding sources and small businesses operate out of cash-flow during this recession.”

The annual growth rate for net mortgage lending continued to decline.

Gross mortgage lending, at £8.9bn, was at its lowest since April 2001.

March’s approval activity, both in volume and value, was marginally lower than in February and remains at a historically subdued level.

Approvals for house purchase fell slightly in March and were some 25% lower than in March 2008. Re-mortgaging approvals declined slightly as borrowers continued to revert to standard variable rates rather than moving to new fixed rate products.

The average value of loans for equity withdrawal and other purposes has changed remarkably little over the last two years. In March 2007, before the credit crunch, the average was £28,700.

Credit card lending rose by £0.3bn and the annual growth rate rose to 8.5%.

Annual growth in personal loans & overdrafts has continued to be negative (ie reflecting a net contraction in amounts outstanding over the last year).

After falling in January personal deposits rose slightly in February and March. However overall personal deposits continue to be weak with an annual rate of growth of 2.7%.

Lending to non-financial companies fell by £1.0bn mainly reflecting the unwinding of takeover finance in the wholesale & retail trade sector (-£0.8bn). The fall in lending to real estate of £0.2bn was the first fall since December 2006.

A large increase in lending to central clearing counterparties in February was largely unwound in March and reflected in lending to financial auxiliaries.