Mortgage lending down 11% in June
Mortgage approvals fell to their lowest level for at least the last 15 years last month, according to the British Bankers’ Association (BBA).
There were 51,610 mortgage approvals in June, representing a total value of £6.5 billion.
The number of mortgages approved for house purchases fell to 26,269 during the month, 11% lower than in May, partly due to the bad weather.
This represents a total value of £4.2 billion, the lowest since January 2009.
Compared with a year ago, the number of mortgage approvals for house purchases was more than 20 per cent lower.
The BBA said that a trend for consumers to reduce their debts on loans, rather than taking out new borrowing, contributed to the slowing mortgage market, along with the Diamond Jubilee and Euro 2012.
David Dooks, BBA statistics director, said: “Paying off loans or overdrafts and building up deposits is the current consumer ambition.”
Potential house purchasers have also been deterred by a trend for lenders to tighten their borrowing criteria and increase their rates for both new borrowers and existing ones.
However, recent deals suggest that this might be changing, helped by the government’s recently launched funding for lending scheme.
The Royal Bank of Scotland has reduced its five-year fixed rate mortgage to 4.79% for those with a 10% deposit.
This rate has been topped by HSBC, which has launched a five-year fixed rate mortgage at just 2.99%, although borrowers must have a 40% deposit and will also have to pay a £1,499 booking fee.
The HSBC deal has been matched by Santander for its existing current account customers only, but Santander’s deal also carries a steep booking fee of £1,495.
The funding for lending scheme should increase levels of lending in the housing market, and is expected to lead to an increase in the number of affordable mortgage deals.