Mortgage lending hits a 10-year-low in September

Published 25th Oct 2010

Mortgage lending has plunged to a 10-year-low during September as activity in the housing market remained subdued, figures from the British Bankers' Association revealed today.

Net lending, which strips out redemptions and repayments, was just £1.6 billion during the month, well down on the previous month's total of £2.5 billion and the lowest figure since October 2000.

The British Bankers' Association said that the number of mortgages approved for house purchase had dropped for the fourth consecutive month to hit an 18-month low, showing that lending is not likely to pick up in the near future.

The BBA figures come a week after the Council of Mortgage Lenders said total advances during September had fallen to their lowest level for the month for a decade.

The muted net lending figure reflects the fact that gross lending remains subdued, with only £8 billion advanced during the month, the lowest level since May 2009 and 11 per cent down on September last year, the BBA said.

At the same time, the BBA also said banks were encouraging customers to pay down their mortgages, contributing to the ten-year low for net lending.

Demand for mortgages remains muted as low interest rates put people off remortgaging, while potential buyers sit on their hands until the outlook for both the property market and the wider economy becomes clearer.

But the number of properties being put up for sale has increased in recent months, putting downward pressure on house prices. Howard Archer, chief UK and European economist at IHS Global Insight, said: 'The BBA data showing mortgage approvals sinking to an 18-month low in September puts further downward pressure on house prices.

'It reinforces our belief that house prices will trend down over the final months of 2010 and in 2011 to lose around 10 per cent in value.

'In our view, the housing market has got very little going for it at the moment, apart from low mortgage rates - and that is if you can get a mortgage.'

Demand for unsecured borrowing also remained muted during September. Credit card borrowing increased by £200 million during the month, but this was offset by a £200 million contraction in the amount owed through loans and overdrafts.

As a result, the amount of money owed through consumer credit was unchanged, in line with August.

Consumers' cautious approach was reflected in a further rise in savings levels, with people increasing the amount they had deposited by £2.7 billion, well up on the recent six-month average of £1.7 billion.

Source: ' ThisIsMoney '

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