Net lending plummeted in July to the second lowest monthly figure since records began in 1993, the Bank of England said yesterday.
Net lending, which strips out mortgage repayments and redemptions, was just £86m in July, compared with £518m in June, and compares with £1.6bn net lending in February.
Gross lending for July was £7.1bn, which was slightly up on the month before. But borrowers paid back almost as much – giving the net lending figure.
The number of mortgages approved for house purchase went up slightly to 48,722 – about half the number at the height of the boom, and well down on last November’s figure of 59,000. Howard Archer, chief UK and European economist at IHS Global Insight, said he now expects house prices to fall 3% by the end of this year. “Although the Bank of England somewhat surprisingly reported that mortgage approvals edged up in July, the fact remains that they were still at a very low level and point to on-going muted housing market activity,” he said.“Housing market data and survey evidence has been consistently downbeat recently and this is no exception.”
Grenville Turner, chief executive of Countrywide, the UK’s largest mortgage broker, said: “It is a little surprising to see the rise in mortgage approvals; however, these figures cannot hide the difficulties facing the current housing market.“Whilst our mortgage approval levels this year to date have risen by 11%, the stark reality is that getting a mortgage is tough as buyers continue to struggle to raise the deposits required or are put off by the interest rates attached to the high LTV mortgages.”
There was a slight increase in the number of people remortgaging during July, the BoE also reported, with approvals for those switching to a new deal reaching 26,951.
Andrew Goodwin, economist for the Ernst & Young ITEM Club, said: “The figures provide further confirmation that the housing market is heading for a double dip, with net mortgage lending pretty much flat and the number of mortgage approvals remaining very low.”
The Building Societies Association also said yesterday that people withdrew their savings from building societies during July at the fastest rate for more than a year, taking out £1.3bn more than they paid in.
Adrian Coles, director general, said: “The withdrawals may indicate the difficult economic conditions that households currently face.”
