Property News Item: 00112

2nd May 2006

Strong mortgage approvals but weak consumer credit

Source: http://www.bba.org.uk

According to the British Bankers' Association (BBA), following last week's release of Major British Banking Groups net lending figures for March, further information now available on lending to individuals shows that:

* March's gross lending of £17.7bn was the highest March total on record, 11% above the previous highest March total two years ago.

*Seasonally adjusted underlying net mortgage lending (gross lending minus repayments and redemptions) rose by £5.4bn, compared with £4.7bn in February, £4.3bn in March 2005 and an average of £4.9bn over recent months.

* There were 217,072 mortgage approvals (for all purposes) in March, with a total value of £21.7bn. This number of approvals was 30% higher than in February, and 15% higher than in March 2005. However approvals data are related to the number of working days in a month and March's 23 working days consequently inflated the total. The average approval for house purchase rose in March, to £134,300, some 6% higher than a year earlier.

* Net lending on loans and overdrafts fell, unusually, by £0.1bn in March compared with a rise of £0.6bn in February and the average of the previous six months (+£0.4bn), whilst net lending on credit cards also fell, by £0.2bn, compared with the recent average increase of £0.1bn.

David Dooks, BBA director of statistics, said: "On the face of it, mortgage lending was strong in March. Whilst partly reflecting the high number of working days in the month, the approvals numbers show that mortgage activity is running at a higher level than at this time last year, although the market is still somewhat short of the heady times of 2004. Consumers' attitude towards their personal borrowing is all too apparent, with March seeing rare net repayments for both credit cards and other personal lending."

Mortgage Lending

* March's gross lending of £17,673mn was 26% higher than February's total of £14,028mn and 29% higher than £13,721mn in March 2005.

* Seasonally adjusted net mortgage lending rose by £5,441mn, compared with £4,736mn in February. The increase in March was stronger than the average of +£4,875mn in the previous six months whilst the annual growth rate is around 12.5%.

* Compared to the same month a year earlier, March's approvals of house purchase loans were 33% higher by number and 41% higher by value; remortgaging loans were 13% higher by number and 26% higher by value; however equity withdrawal loans were 2% lower by number and 1% lower by value.

Consumer Credit

* New borrowing on credit cards totalled £7,215mn in March. This was 7% higher than the previous month but as repayments outstripped spending and after seasonal adjustment, net lending fell by £239mn compared with a recent average monthly increase of +£121mn.

* The strongest month for new lending on personal loans since September was partly offset by a large repayment of overdraft borrowing and after seasonal adjustment, net lending showed a very rare decrease, of £133mn, compared with a recent monthly average of +£383mn.