More Dismal Housing Figures For UK Market

by Mark Johnston

New figures paint a dismal picture of current mortgage lending in the UK. The report shows that lending by the leading Banks and Building Societies is at its lowest levels for eleven and a half years.

The data shows that potential buyers are not returning to their previous levels as they stay well clear of the current housing market. Net lending fell by £880 million during December strips out redemptions and repayments and is the lowest level its been since the 90’s way back in June 1999.

The outlook for 2011 is pretty dismal with only just under 29,000 mortgage being approved during last month.

Lending look set to remain subdued, with just 28,726 mortgages approved for house purchase in December, a level last seen in January 2009.

The steep fall in advances in December rounded off a difficult year, with net mortgage lending by the major banks for the whole of 2010 dropping to £20 billion, down from £35.4 billion in 2009.

The reduction has been caused by a shortage of money to lend as a result of the credit crunch, as well as the tight lending criteria adopted by banks, which has reduced the number of people who would qualify for a mortgage, while the problems in the housing market have also hit demand.

But despite the 44% slide in new business, the BBA pointed out that the major banks were still far more active in the market than other lenders, such as building societies and specialist firms.

David Dooks, BBA director of statistics, said: “The main banks’ net lending rose by £20 billion in 2010, in contrast to lending by all other lenders, which decreased by around £12 billion.

“However, mortgage demand was weak throughout the year, with 10% fewer loans approved than in 2009.”

The figures come the week after the Council of Mortgage Lenders said total mortgage advances by all lenders in 2010 sank to their lowest level for a decade during 2010 to just £136.3 billion.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “The BBA data point to the housing market ending 2010 very much on the back foot, where we expect it will remain for much of 2011.

“Housing market activity remains stuck in the doldrums, which seems highly likely to maintain downward pressure on prices.”

The BBA figures also showed that the number of loan approvals for people remortgaging fell back slightly during December to 24,466, after steadily increasing during 2010 as consumers worried about future interest rate rises.

But for the year as a whole, remortgage numbers were 7% lower than in 2009, while there was also a 12% fall in the number of people unlocking equity from their property, with just 15,262 setting up a loan for this purpose in December – the lowest level since records began in 1997.

Demand for unsecured borrowing remained weak during December, and contracted by 2.2% during the whole of 2010.

Credit card purchases dropped by nearly 6% in the final month of the year, although this is in part likely to reflect weak retail sales due to the bad weather in the run-up to Christmas.

Repayments continued to be higher than new spending, leading to outstanding plastic debt falling by £53 million once interest and charges were factored in.

Lending through loans and overdrafts contracted for the 17th consecutive month, with consumers repaying £322 million more than they borrowed.

People saved £2.3 billion during December, down on November’s £4.7 billion, but broadly in line with the recent six-month average of £2.7 billion.


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