The annual growth in banks’ net mortgage lending was 3.5% in October, substantially ahead of the 0.8% for the whole mortgage market in September. However, banks' gross mortgage lending of £7.6 billion in October was 16.1% lower than a year ago.
Net mortgage lending increased by £1.7 billion in October compared to £3.0 billion in the same month in 2009. House purchase approvals by banks were marginally lower in October, reflecting weak mortgage market activity. The average value of house purchase approvals (£144,900) rose in October and was 2% higher than a year ago.
Numbers of remortgaging approvals in October were stronger than the recent six-month average while those for equity withdrawal remained weak.
BBA statistics director, David Dooks said: “Activity in the mortgage and consumer credit markets continued to be subdued in October, reflecting uncertain prospects for households and lower consumer confidence.
“Credit availability for viable businesses has improved, so a continued contraction in net lending growth reflects repayment behaviour, particularly by larger companies.”
Commenting on the data, Chris Gardner, a director at independent mortgage broker, Obligo, said: "In recent months there has been a steady but very noticeable decline in the number of mortgage applications.
"If it's not concerns about their livelihoods that's holding people back, in many cases they are not even bothering to apply for a mortgage, as they feel their chances of getting accepted are just too slim. This is particularly the case with people in need of higher LTV loans.
"Although lenders highlight the growing number of products available on the market, in reality these products are variants of the same lower LTV offerings. The breadth of products is still very limited.
"In certain cases, reduced uptake is due to lenders' overreaction to regulatory developments. When the FSA announced it was looking at self-cert and interest only, these products all but disappeared even though we are merely at the consultation stage. Borrowers are nervous for obvious reasons but so are lenders from a regulatory perspective and this is reducing product diversity."
Richard Sexton, business development director at e.surv, said: “The weakness in the mortgage market reflects both nervousness among potential buyers and also more restrictive credit conditions among lenders.
“But beneath the surface there is a real two-speed market in operation. Approvals are actually up for the most expensive properties – wealthy buyers are using large deposits to side-step lending restrictions, and they are more likely to be in parts of the country, like prime London, which have been more insulated from wider market weakness.
“The flip side is that approvals for cheaper properties have fallen dramatically. It’s hard to foresee a significant improvement in mortgage lending, however, while banks are focused on the withdrawal of the Special Liquidity Scheme, the end of credit guarantees and the arrival of Basel III. Add sovereign defaults into the mix and lenders are likely to be pretty risk averse for a while, leaving hopeful mortgage borrowers out in the cold.”
