October decline in mortgage lending

The British Bankers’ Association (BBA) has released figures showing a reduction in the number of mortgages advanced in October.

The number stands at 44,105, which is 19% down on September of this year and 37% less than in October 2006, when more than 70,000 mortgages were advanced.

According to David Dooks, the BBA’s director of statistics, “October’s data provides evidence of a rapidly slowing mortgage market and of consumers limiting their personal borrowing.”

Members of the BBA provide around two-thirds of all mortgage lending in the UK and it is possible that the latest statistics reflect factors specific to the banking sector, such as the Northern Rock’s crisis.

From time to time, lending by BBA members has not reflected the market as a whole, but even taking this into account, the October figures are the lowest for any month since the Association began publishing the data in its present form, in September 1997.

Howard Archer, chief economist at Global Insight, the economic forecasting consultancy, believes that: “Heightened affordability pressures are making it increasingly difficult both for first-time buyers to get into the housing market and for existing house owners to trade up”.

He adds that: “rising concerns about the overall state of the economy may well make people more unwilling to risk stretching themselves to buy a house”.

Also to be taken into account is the likelihood that “growing speculation that the housing market could see a sharp correction over the coming months may also increasingly deter potential house buyers”.

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