Total net lending to individuals slowed in April, the Bank of England has revealed, with mortgage lending continuing to decline. however, remortgaging is still on the rise as homeowners stay put.
With the credit crunch pushing up mortgage
rates and damaging house prices, homeowners are finding it increasingly difficult to move house, and first time buyers are discovering that they have been largely frozen out of the market, causing fewer people to move house or buy their first home.
Instead, people are staying in their current home – either by choice or necessity – leading to a rise in the number of people who are opting to remortgage
rather than move house.
Total lending to individuals in April was up £7.3billion, below March's growth of £7.9billion, and considerably weaker than the six month average of £8.7billion.
Within that total, the increase in lending secured on dwellings was at £6.4billion, below the March increase of £6.7billion, and below the £7.5 average for the previous six months. There were 58,000 loans approved for house purchase, compared with 106,000 for remortgaging.
As credit providers tighten their lending criteria, net growth in consumer credit has also slowed to £0.9billion, below March's growth of £1.2billion, which was also the average growth for the previous six months.
"The latest weak data on mortgage approvals highlights the continuing problems facing borrowers trying to secure finance to purchase property," said Simon Rubinsohn, chief economist for the Royal Institute of Chartered Surveyors (RICS). "Lenders are continuing to tighten up on the conditions accompanying new loans making it hard for first time buyers to take advantage of the modest fall in house prices seen over the part few months.
"The 58,000 mortgages approved in April is roughly half the total sanctioned in the same month a year ago. This highlights very clearly the real problem facing not just the property market but also the wider economy.
"A collapse in transactions of this magnitude has major implications both for consumer spending and a wide range of ancilliary industries. Although a supportive response from the Bank of England is improbable in the near term, the persistence of such a trend could force the hand the authorities as autumn approaches."
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