Mortgage lending down as borrowers repay debt

By THIS IS MONEY
Updated: 06:12 EST, 4 May 2011

The stagnation in the property market was underlined today by lending figures from the Bank of England which showed a 60% fall in mortgage lending in March.

Stagnant: There is little new money flowing into the property market.

Net lending, which strips out redemptions and repayments, totalled just £374m during the month, well down on February's £950m and January's £1.71 billion, according to the Bank of England.

However, there was a further slight pick-up in the number of mortgages approved for house purchase in March, with these rising to 47,557, the highest level since November last year.

But the figure is still down on the 48,967 loans which were in the pipeline in March 2010, and significantly below the 70,000 to 80,000 a month that economists consider to be consistent with a stable housing market.

The subdued level, which was the lowest figure since net lending contracted by £366m in December, is likely to reflect a combination of the stagnant housing market and the fact that homeowners are taking advantage of low interest rates to pay down their debt.

Samuel Tombs, UK economist at Capital Economics, said: "March's UK household borrowing figures suggest that activity in the housing market remains at a very low level.

'While the Bank of England's measure of mortgage approvals for new house purchase rose from 46,700 to 47,600 in March, that rise only took approvals back to the level seen in November. What's more, even though activity has picked up a bit, house prices are still broadly stagnant.'

The number of loans approved for people remortgaging fell slightly in March, dropping to 32,116 from 35,567, although they were still 23% higher than a year earlier, as high inflation during March led to predictions that an interest rate hike could be imminent.

Unsecured borrowing remained subdued, with credit card, loan and overdraft debt rising by just £108m during March, compared with a jump of £784m in February.