BBA figures show declining mortgage and remortgage approvals, but a slight increase in gross lending

Mortgage approvals fell by 6% in April to 29,355, down from 31,205 in March and a steep fall of 18% on the 35,840 mortgages approved in April 2010, according to the British Bankers’ Association (BBA).

Seasonally-adjusted gross mortgage lending fell by 5% year-on-year in April to £7.9bn, but the figure is 1% up on March 2010, when lending totalled £7.8bn.

However, the non seasonally-adjusted figures paint a bleaker picture, showing a monthly fall of 10% in gross mortgage lending between March and April 2011.

The number of remortgage approvals in April were 12% lower than the previous month and 7% lower than in April 2010, while approvals for equity withdrawal continue to be “subdued” at 22% lower in April 2011 than April last year.

The BBA said that despite the weakness in both house purchase and remortgaging approvals, gross mortgage lending was “stable”: with repayments continuing at a fairly high level, net mortgage lending increased by £1.3bn in April.

The BBA also said net consumer credit rose by £47m in April, following a £29m rise in March. There was modest net borrowing of £228m on credit cards in April, while there was a net repayment of £181m in personal loans and overdrafts.

BBA statistics director David Dooks said: “Individuals and businesses continue to save more, pay off debt and borrow less as uncertainty about the economy has entrenched a ‘wait and see’ attitude. However, banks are still able to meet the need for home loans, even though demand remains weak.”

Howard Archer, chief economist at IHS Global Insight, said mortgage approvals were now running at just above half the average monthly level of 57,644 seen since 1997.

“The relapse in mortgage approvals in April from an already low level reinforces our belief that modest falls in house prices are more probable than not over the coming months, as tighter fiscal policy and the possibility of gradually rising interest rates before the end of 2011 maintains pressure on the housing market,” he said.

He added that the consumer credit figures add to the overall impression that consumer appetite for taking on new borrowing remains limited, and there is an ongoing desire of many consumers to reduce their debt.

“Consumer desire to get a tighter grip on their finances is a reflection of current very low and falling consumer confidence and is the consequence of an uncertain and somewhat worrying longer-term outlook for the economy and jobs as the major fiscal squeeze increasingly kicks in,” he said. “Meanwhile, there remains limited availability of unsecured credit from banks, despite reportedly increasing slightly in the first quarter.”