Mortgage Lending Hits New Low

Mortgage lending sinks to its 4-month low last July with just 86 million loans approved compared with 517 million a month before

. This was disclosed in the figures released by the Bank of England, unleashing another round gloomy forecast for the countrys economy for the rest of 2010.

Andrew Goodwin, a senior economic adviser to the Ernst & Young ITEM Club, said that figures released by the bank reveals further confirmation that the housing market is headed for a double dip, with net mortgage lending pretty much flat and the number of mortgage approvals remaining very low."

But it should be noted that bank approvals for home mortgages actually rose in July. Unfortunately, total net amount lent was at its lowest since March. It was the fourth steepest dive in the Banks record since 1993. There were 48,722 mortgage approvals in July, up by an incremental 160 from 48,562 in June. This remains less than half of expected peak levels for this period and 20% below a 21-month peak registered in November last year.

This was well above the 46,500 forecast but net lending at a mere 86 million was way below the expected 700 million.

On the other hand, theres a promising light at the proverbial end of the tunnel with a rise of 173 million in unsecured consumer loans from credit cards which followed a sudden strengthening in the monthly GfK/NOP consumer confidence data released earlier. The increase, however, did not materially offset the larger than anticipated decline in total lending which was just 258 million, the lowest since March.

Figures released by the Bank of England showed that the money supply gauge remained unchanged for the month. Aggregated M4 money growth was up 0.4%, the strongest indication since last October, but the annualized M4 growth slowed to a high 2.3%, the weakest point since the data series commenced in July 1983.

Vicky Redwood, of Capital Economics, noted that the countrys housing market is not getting any better. The best that can be said is that approvals didn't fall further."

Analysts had earlier forecasted that thered be no change in credit card spending while mortgage lending would rise to 700 million. But consumer credit card spending rose to 173 million after dipping to 59 million during the previous month while mortgage lending fell steeply.

The Building Societies Association also made its figures known which showed total mortgage advances from mutual reaching the highest todate at 2 billion in July. But after repayments and redemptions, net lending showed a contraction with homeowners repaying 378 million more than what they borrowed during the month.

In addition, customers were observed to withdraw savings from their building societies and the same month saw 1.31 billion withdrawn more than what was paid in, making it the fast withdrawal rate in more than 12 months.

The director-general of the BSA, Adrian Coles, said: "The withdrawals may indicate the difficult economic conditions that households currently face.

by: Simon Drew

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