UK mortgage approvals fall

March’s net mortgage lending weakened and all forms of mortgage approvals declined, according to figures from the British Bankers’ Association (BBA).

Credit card lending increased slightly as other unsecured lending weakened. Personal deposits grew more strongly than in recent months. Lending to financial companies continued around trend.

BBA statistics director, David Dooks, said of the latest data: “The consequences of low banking sector liquidity show up clearly in March data; reduced product ranges and tighter criteria resulted in slower mortgage lending and significantly fewer loan approvals. Pressures on personal finances are also constraining demand, not only for mortgages, but also for personal loans and borrowing on cards.”

Gross lending weakened again in March and is expected to continue to weaken as approvals for all forms of mortgage lending have declined further.

Net mortgage lending was lower in March reflecting weaker gross lending.

The annual growth rate has stabilised around 13% in recent months.

All forms of mortgage approvals weakened in March and at 129,300 were at their lowest since September 2000. Approvals for house purchase were the lowest since the series began in September 1997.

Approvals for remortgaging, though weaker than recently, represented close to 50% of total approvals.

Annual growth in credit card borrowing increased slightly to +6.5%. Repayments continued to outstrip new spending, as they did throughout 2007, so growth largely reflects interest charging. Annual growth in loans and overdrafts fell slightly to +5.2%.

Overdrafts increased slightly in March after falling last month.

Personal deposits have continued to show signs of recovery in early 2008 and are now in line with the long-term average.

Lending to non-financial companies was, as usual, dominated by lending to real estate, which continues around its long term average. Lending to wholesale & retail trade and to transport storage & communication were stronger than average. For financial companies borrowing was dominated by financial auxiliaries.