Net mortgage lending grew by just 0.4% in the year to December as a result of a consumer focus on repaying debts.
BBA statistics director David Dooks said: "2012 was a year of holding on to deposits and repaying debt for companies and households. New mortgage lending of £92bn was offset by £91bn of repayments and slow economic growth also continued to suppress new borrowing demand from consumers and from companies, where bond issuance was preferred to bank finance.”
During 2012, approvals for house purchase were 2% lower than in 2011 but ended the year a little stronger with some reports that more first-time buyers were entering the market.
The average house purchase approval fell to £151,100 while approvals in 2012 for remortgaging and other loans were some 23% and 21% lower respectively than in 2011 reflecting lower activity in the housing market.
The current average total of 63,000 approvals a month compares with 230,000 a month in the peak year of 2003.
Paul Hunt, managing director of Phoebus Software, said: “While the mortgage market may not be in peak physical condition, its fitness has been improving following a summer of low lending. Lenders are cutting rates and making more money available to a wider range of borrowers.
“The revival in lending to first-time buyers towards the end of 2012 was particularly marked.”
Nick Hopkinson, director of property company PPR Estates, said the BBA’s data signified the end of a “terribly depressing year”.
He said: “Net lending growth in all major categories was down on 2011 for the major banks. Looking at new mortgage lending, even with the much heralded Funding for Lending Scheme in-place, approvals were still down in December on this time last year.”
Hopkinson said the high-street banks are currently approving less than 27% of the loan numbers for house purchase they were before the credit crunch.
He added: “It’s clear the banks have a long way to go before they are really open for business and are still struggling will billions of pounds of bad debts in the background. It’s also distressing to see they are simply squeezing savers now they are getting cheap money from the Government; this tells us all we need to know about their collective moral consciences once again.”
