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Bank lending weak from deleveraging

MORTGAGE lending slumped in April to its lowest monthly level since February 2001 and the number of mortgage approvals only inched higher in what is typically a strong month for the housing market, fresh statistics from the British Bankers’ Association (BBA) showed yesterday.

Banks’ net mortgage lending fell to £1.8bn in April compared with £2.3bn the previous month and only 35,729 mortgages were approved in April, up on March but still below the average for the previous six months.

Analysts said that the data showed that consumers and businesses have been keen to pay down their debts.

Varun Bhabha at Barclays Capital said the weak April data was surprising. “It could be indicative of households remaining cautious in light of uncertainty surrounding the fiscal outlook,” she added.

The BBA’s statistics director, David Dooks said: “Household priorities are clearly reflected in these latest data, with people paying down debt rather than building up savings, even in the main ISA season.”

Uncertainties about the impact of government policies and the economy on households and businesses will continue to dent consumer confidence and influence decision-making,” he added.

Subdued spending has led to consumer credit contracting by 2.6 per cent over the past year, the BBA said, although it noted that the growth in card borrowing remains stable.

Net consumer credit was negative for the 12th month in a row and BBA data indicates that consumers have repaid £2.5bn worth of unsecured credit to British banks since the last quarter of 2008.

The BBA also reported that overall lending to non-financial companies fell by £1.1bn in April after a decline of £2.9bn in March. This is being influenced significantly by low corporate demand for credit, said IHS Global Insight’s Howard Archer.