MORTGAGE lending dipped during February, according to surprising official figures from the Bank of Lending, marking the first monthly drop in a year.
There were 70,309 mortgages approved by financial institutions in February, down by more than 6,000 from January’s figure, which was the highest in six years, going back to the onset of the 2008 financial crisis.
Every category of mortgage lending fell, but the market still remains at a much stronger level than the same period last year: lending has risen by a little more than a third during the last 12 months.
Despite the drop, Richard Sexton of chartered surveyors E.surv said that the most interesting development was the return of high loan-to-value (LTV) mortgages.
Sexton said: “Monthly high LTV loans have topped 11,000 for the first time in six years, as banks increase lending to borrowers with smaller deposits, and as rates remain low. More first-time buyers are using Help to Buy to get on the ladder while they can, and before prices clamber out of their reach.”
Lending to businesses still appears to be declining overall, with a further drop of £750m recorded during the same month. Despite this, lending to small and medium-sized businesses bucked the trend, increasing by £159m.
Unsecured credit going to consumers dropped from January’s four- month high to a four-month low at £552m, and came in below the consensus forecast of analysts.
Commenting on the data, Capital Economics’ Samuel Tombs said: “There are still no signs that the UK’s economic recovery is being driven by an unsustainable accumulation of credit.”
Tombs added that with a new regulatory approach coming in late this month, lending is unlikely to snowball: “With the mortgage market review, which sets out stricter rules for lending, set to be introduced in late April, a strong recovery in mortgage approvals back to the levels seen before the financial crisis continues to look unlikely.”
John Bulford of Oxford Economics agreed with Tombs; “The bigger picture is one of a continued normalisation of credit conditions and a steady pickup in lending levels. With lending growth remaining slower than nominal GDP any concerns that the economic recovery is being driven by a household borrowing binge look misplaced.”