Mortgage lending at eight-year low

Mortgage lending is at an eight-year low, according to new figures

Mortgage lending slumped to an eight-year low during April but there are further signs that activity in the housing market has stabilised.

Net lending by the major banks totalled just £2.7 billion during the month, the lowest figure since March 2001, the British Bankers' Association said.

But the number of mortgages approved for house purchase increased to the second highest figure in just over a year as buyers returned to the market.

A total of 27,685 mortgages were approved for people buying a new property during the month, 4% more than in March, and only 16% lower than a year earlier, building on evidence that house purchase activity has now passed its trough.

But the average value of these mortgages has dived from £155,100 in April last year to £129,100 last month, reflecting the steep house price falls seen during the past year.

The number of people remortgaging to a better deal fell for the fourth month in a row during April to hit a near 10-year low.

Only 25,418 remortgage loans were approved during the month, as historically low interest rates mean many homeowners are better off staying on their lender's standard variable deal when their existing mortgage comes to an end, rather than switching to a new mortgage.

There was also a further decline in mortgage approvals for equity release and buy-to-let properties.

The steep decline in remortgage activity is dragging down the total lending figures, with the value of all mortgages approved falling slightly to £7.2 billion during the month, despite the value of approvals for house purchase rising.

David Dooks, British Bankers' Association (BBA) director of statistics, said: "The house purchase part of the mortgage market appears to have stabilised, with slightly more approvals coming through, although April's weak net mortgage lending reflects the lower number of approvals in previous months. Households' uncertain financial circumstances not surprisingly continue to dictate consumer behaviour, both in the housing market and in generating only low demand for new personal loans."