Industry | 2010.08.31
Mortgage figures plunge in July
Bank of England report shows mortgage lending at second-lowest level since records began
Mortgage lending fell sharply in July as activity in the housing market remained subdued, according to Bank of England figures released today.
Net lending totalled £86m for the month, down from June\'s £518m and the second-lowest monthly lending figure since the Bank\'s records began in 1993, although there have been two months when net lending was negative.
The number of mortgages approved for house purchases edged ahead slightly during the month, rising to 48,722 from 48,562, well down on the levels of more than 100,000 a month seen during the housing boom. The figure was also down on the high of slightly more than 59,000 in November.
Meanwhile, net lending by mutuals remained in negative territory at -£379m in July compared with -£432m in June, according to the Building Societies Association (BSA). Adrian Coles, director-general of the BSA, said: "There remain significant challenges such as heightened uncertainty about job prospects and household incomes, potentially limiting future demand. This could make it difficult to sustain the growth in activity."
Howard Archer, chief UK and European economist at IHS Global Insight , said: "Although the Bank of England somewhat surprisingly reported that mortgage approvals edged up in July, the fact remains that they were still at a very low level and point to ongoing muted housing market activity. Housing market data and survey evidence has been consistently downbeat recently and this is no exception.
"Consequently, we continue to suspect that house prices will fall back over the latter months of 2010 and then very likely soften further in 2011." Archer expects house prices to fall by around 3% during the second half of this year, followed by a drop of around 5% in 2011.
There was a slight increase in the number of people remortgaging during July, the Bank of England said, with approvals for those switching to a new deal reaching 26,951, slightly up on the previous six-month average, but there was a small dip in those unlocking equity from their home or taking up a buy-to-let mortgage.
Unsecured borrowing also remained subdued during July, with net lending rising by £173m. Within the total, credit card borrowing rose by £213m, but lending through loans and overdrafts contracted by £41m.
The BSA also announced that, excluding interest added to accounts, £1.3bn was withdrawn from savings accounts at mutuals in July, compared with £0.3bn in June.
Coles said: "The withdrawals may indicate the difficult economic conditions that households currently face. In addition, these withdrawals could have been intensified by competitive rates from National Savings & Investments , which subsequently withdrew products in the middle of July in the wake of considerable inflows."
For more information, please visit
http://www.guardian.co.uk/money/2010/aug/31/mortgage-lending-plunge-july
