The number of new mortgages edged up slightly in September from the previous month’s record low but at 33,000 home loans, the volume remains well below the average of the previous six months.
Consumer lending data from the Bank of England, released on Wednesday, show that overall, net lending secured on homes – new and re-mortgages – was £2.2bn. However, net lending in August – the value of loans extended minus repayments of principal received – was revised downward from the £0.1bn rise previously reported and was actually a net negative at -£0.1bn.
Howard Archer, economist at Global Insight, noted it was the first ever month of negative net mortgage lending since the Bank’s series began in 1993.
That total number of mortgages outstanding in the UK could actually shrink is illustrative of the extent to which credit is being restricted in the economy. Falling house prices are deterring new buyers from entering the market because they believe more bargains will emerge later while lenders are becoming more risk averse and demanding larger down-payments..
“Despite the very limited improvement from August, the Bank of England mortgage data for September still showed that housing market activity continued to be decimated by the highly damaging combination of stretched buyer affordability and tight lending practices,” Mr Archer said.
He suggested that the latest lending data, combined with evidence of a deepening economic downturn, will reinforce pressure on the Bank’s Monetary Policy Committee to cut rates by half a percentage point to 4.0 per cent when it meets next week.
Re-mortgaging levels in September also edged up slightly to 72,000, but remained below the 82,000 average level of the previous six months. Total loans backed by homes as collateral were 143,000 in September. They had averaged 169,000 over the previous six months.
Meanwhile, the Building Societies Association (BSA) said net mortgage lending by its members has turned positive again, rising to £314 in September from -£37m in august, but remains 47 per cent below lending levels in the year ago period.
Adrian Coles, director general of the BSA, said: “With the housing market depressed as house prices continue falling and with confidence amongst potential homebuyers low, it is no surprise that mortgage lending is down on last year.” He added that mortgage lending is unlikely to recover “for some time.”
Source:
The Financial Times