Mortgage lending fell in February

Robyn Hall

March 25, 2013

The BBA said the total number of mortgages granted was 6% lower in February than at the same time a year ago.

David Dooks, BBA statistics director, said: “Banks continue to support household borrowers, providing almost £8 billion of mortgage lending in February.

“But low interest rates allow homeowners more scope to increase repayments on their mortgages and reduce the outstanding amount.

“Annual growth in unsecured borrowing on credit cards and personal loans has edged up over recent months, albeit remaining subdued.”

Some 30,506 home loans were approved during the month, the lowest figure since last July.

The amount of money being lent to homeowners fell by £65m, compared with January.

Duncan Kreeger, director at peer-to-peer lender West One Loans, said: “The frigid reality of mainstream lending is getting harder to ignore.

“Some economists and politicians were talking about a “mortgage thaw” – but today’s news represents another cold front blasting down the high street.

“This stumbling motion isn’t good enough, not when there’s so much ground to make up.

“In February 2007 the BBA lent £18.2 billion pounds. But this February, the same lenders were 57% behind that level. In six years, there’s been next to no progress.

“Of the 22 different trading names that make up the BBA, 14 of them – or 60% – have been bailed out by the taxpayer.

“That performance is especially poor given the latest plans in the Budget to extend the Funding for Lending subsidy.

“On Budget day itself, similar news was snuck out from the Council of Mortgage Lenders.

“But for normal people trudging up and down the high street for a loan, it’s clear that mainstream mortgages are still thoroughly sub-zero.

“With alternative finance borrowers can get a loan in 48 hours, rather than six years. So members of the BBA will really need to get their skates on to compete in the 21st century.”

Peter Williams, executive director of IMLA, added: “The fact that approvals for house purchases, remortgaging and other loans have each fallen year-on-year shows once more how important it is to open the door of the Funding for Lending Scheme to the non-banking sector.

“Optimism was high at the turn of the year that great strides would be seen in total gross mortgage lending for 2013, particularly after four consecutive months of increasing purchase mortgage approvals by the main High Street banks. However in the first two months of the year we have seen almost £1.4bn less purchase mortgage lending and more than 7,500 fewer purchase loans approved, compared with last year.

“It is understandable that many banks are sticking to their tight criteria in the current climate but inviting the non-banking sector to access incentivised funding would be one way to help lenders deliver more for UK borrowers.”

Ashley Brown, director of the independent mortgage broker Moneysprite, said: “With half the country frozen solid, Britain’s mortgage lending climate is sliding back into the deep freeze too.

“Growth in net mortgage lending has fallen to negligible levels – up just 0.1% in a year.

“Stubbornly low levels of confidence are biting into people’s attitude to money, with many more of us saving rather than borrowing.

“This is despite the Funding for Lending Scheme’s success at unblocking the credit pipeline. It took time to kick in, but its impact has been undeniable.

“Mortgage lenders are open for business once again. 95% LTV loans are not just available, but more importantly they are affordable again as a genuine price war gets underway.

“For much of 2012 the main thing holding back the mortgage market was a lack of property for sale. With the housing market still weak in much of the country, sellers held back in hopes that things would improve.

“Now the housing market is making its first tentative steps towards a return to normality, but people’s appetite for mortgages, even the good value mortgages available now, is being stymied once again by a paralysing lack of confidence.”

And Brian Murphy, head of lending at Mortgage Advice Bureau, said: “It comes as no surprise that today’s BBA figures show remortgaging is propping up the total number and value of mortgage lending by the main High Street banks. We saw 17% more remortgaging applications in our network in February, compared with January, with borrowers also enjoying the highest remortgage loan to value (LTV) – 62.1% – in over four years.

“But with 800 extra remortgage applications approved compared to the previous month, it is a worry that the total number of purchase mortgage approvals fell by nearly twice as much. Offering incentivised funding for banks to draw on, as the Government is doing, is only part of the solution. For the time being there has been little change in lenders’ criteria, and extra lending has largely focused on people who had access in the first place.

“Ahead of the Help to Buy scheme launching in January 2014, there is plenty of time to consider whether a better targeted version of the Funding for Lending Scheme would help to loosen the purse strings and support more people to make home purchases.”

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