Gross mortgage lending of £7.7bn in March was slightly lower than the recent six month average of £7.9bn and 11% lower than gross lending in March 2010. Despite gross mortgage lending holding up fairly well recently, said this was due to stronger remortgage activity rather than new house purchases.
BBA statistics director, David Dooks, said: "Uncertainty about future prospects for the economy is a significant factor behind these statistics. Weak trading activity is discouraging businesses from borrowing to expand and most are oriented towards repaying debt and reducing their operating costs; larger corporates are also using the capital markets less.
"Householders also remain focused on paying down debt, leading to a net contraction of unsecured borrowing and low net mortgage lending, although new mortgage lending is holding up fairly well."
Ed Stansfield, chief property economist at Capital Economics, said: “The main driver of the drop in the number of approvals was a 7% month on month fall in the number of loans approved for remortgage. By contrast, at 31,660, mortgage approvals for house purchase rose for the third consecutive month. However, that rise needs to be put in context. Approvals for house purchase remain 10% lower than a year ago and only half the average level seen during 2006 and 2007.
“Anecdotal evidence suggests that some of the recent increase in mortgage demand may have been driven by buyers rushing to beat the introduction, earlier this month, of the new 5% rate of stamp duty on properties over £1m. That suggests that there is a risk that some of the recent gains are reversed over the next month or two.
“Given that today’s GDP data for the first quarter show that the economy has failed to grow at all over the past six months and with the fiscal squeeze set to be at its most intense this year, the risks to the outlook for buyer confidence and thus mortgage demand probably still lie to the downside.”
