BBA tracks falling consumer borrowing

31 May 2007
Homeowners are beginning to curb their borrowing under the onus of four successive base rate rises, the British Bankers' Association (BBA) has found.

Net mortgage lending stabilised in April, with just one per cent more mortgages approved than in April 2006, at 170,000 in total.

Although gross lending was 12 per cent higher than in April 2006, this rise was largely because of annual house price growth of ten per cent, which has forced customers to borrow larger sums, the BBA's director of statistics David Dooks said.

Growth in underlying net mortgage lending was also slower than the increase in March at just £5 billion, well below the recent average of £5.4 billion, suggesting that the "cumulative effect of higher interest rates" is beginning to 'bite', Mr Dooks remarked.

Meanwhile, the Royal Institute of Chartered Surveyors' chief economist David Stubbs noted that homebuying was now out of reach for many first-time buyers.

But he added that the savvy decision to get onto fixed-rate mortgages had shielded many homebuyers from the impact of rate rises.

Nevertheless, chief executive Paul Holmes stressed that first-time buyers must stress-test their finances and avoid entering into any "reckless" and unaffordable mortgage arrangement.

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