Approvals of home loans drop sharply

MORTGAGE approvals fell sharply in January in response to inflated December activity and adverse weather conditions, the British Bankers’ Association (BBA) said yesterday.

Data from the BBA showed that the number of mortgage approvals for house purchase fell to 35,083 last month from an elevated 45,650 in December, which had been boosted by the end of the stamp duty holiday at the end of 2009. Stamp duty on home sales now kicks in at £125,000, after a higher threshold of £175,000 was put in place to help to kick-start the housing market

The BBA’s statistics echo those of the Council for Mortgage Lenders. which last week reported that mortgage lending had hit a 10-year low in January.

New spending on credit cards also declined last month to £5.6bn, 3.7 per cent lower than in January 2009. Total consumer credit has contracted by 1.8 per cent over the last year, the BBA said.

The BBA’s David Dooks said: “After the Christmas period, demand for consumer credit was weaker in January, as people shied away, or were discouraged by the weather, from retail spending and held on to their deposits.” This does not bode well for the high-street, which has struggled so far this year.

IHS Global Insight’s Howard Archer said: “The ongoing net repayment in consumer credit in January was primarily the consequence of many consumers’ desire to reduce their debt in the face of a still very worrying economic environment.”