BoE: Lending climbs £0.7bn

Total lending to individuals rose by £0.4bn in December, an annual growth rate of 0.8%.

Repayments in December were £11.4bn, in line with the previous six-month average.

The number of loan approvals for house purchase was 53,939, broadly unchanged from 52,628 in November.

The number of approvals for remortgaging increased in December to 32,422 from 31,265 in November.

Richard Sexton, director of e.surv chartered surveyors, said: “The market has shown remarkable resilience so far but sterner tests are to come in the following months.

“The UK economy is teetering on the brink of a second recession and lenders’ confidence is taking a hit because of the absence of a solution to the financial crisis in Europe.

“There are well-founded fears of a serious credit crunch, which could force lenders firmly back within their shells. Banks are already under pressure as funding becomes harder and this will inevitably feed through into the mortgage market.”

Sexton added that banks would not be in a position to lend more, particularly to first-time buyers.

He said: “Loan-to-values are already showing signs of dropping this year, after a steady increase in 2011, as mortgage lenders once again tighten their deposit requirements and rein in their lending to lower income buyers.

“With credit so restricted and likely to become more so, banks will look to meet their targets by lending more to wealthier buyers and Buy-to-let investors.”