Mortgage lending by high street banks in 6% drop
Mortgage approvals for house purchase dropped in February for a second consecutive month.
New data from the British Bankers Association ties in with a similar report from the Council of Mortgage Lenders relating to a drop in mortgage advances during February which was issued on Budget day last week.
According to the BBA, house purchase mortgage approvals were 6% lower than in February last year. Approvals for remortgages were down 15% on a year ago, but up on the previous month.
Altogether, there were 30,506 house purchase loan approvals, down from 31,983 in January, and from 32,242 in February 2012.
Remortgage approvals stood at 15,980, up from January’s figure of 15,184 but down from February 2012’s figure of 18,088.
Duncan Kreeger, director at peer-to-peer lender West One Loans, said: “In February 2007 the BBA lent £18.2bn. But this February, the same lenders were 57% behind that level. In six years, there’s been next to no progress.”
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “It comes as no surprise that the BBA figures show remortgaging is propping up the total number and value of mortgage lending by the main high street banks.
“We saw 17% more remortgaging applications in our network in February compared with January, with borrowers also enjoying the highest remortgage LTV, of 62.1%, in over four years.
“But with 800 extra remortgage applications approved compared to the previous month, it is a worry that the total number of purchase mortgage approvals fell by nearly twice as much.
“Offering incentivised funding for banks to draw on, as the Government is doing, is only part of the solution. For the time being there has been little change in lenders’ criteria, and extra lending has largely focused on people who had access in the first place.
“Ahead of the Help to Buy scheme launching next January, there is plenty of time to consider whether a better targeted version of the Funding for Lending scheme would help to loosen the purse strings and support more people to make home purchases.”
David Newnes, director of LSL, owners of the Reeds Rains and Your Move chains, said: “For mortgage lending to significantly improve, several things must happen. First, banks need to be able to reduce high deposit requirements, which are stopping lots of borrowers from accessing the cheap rate deals on offer.
“Second, wage growth needs to improve and inflation must be brought under control so the strain on personal finances begins to loosen.
“The Government must continue to support first-time buyers through the very welcome schemes such as Help to Buy.
“While it’s frustrating they’re waiting nine months to implement it fully, the scheme will enable more first-time buyers to realise their dream of home ownership, which has been a distant fantasy for far too many young people in this difficult economic climate.
“The new schemes will undoubtedly help unlock the door to home ownership for lots of waiting buyers.”