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Home lending still difficult, warns Bank

MORTGAGE lending saw its weakest rise on record last month, according to the Bank of England, signalling the squeeze on home lending is far from over, despite recent signs that the property slump could be levelling out.<br /><br />The number of home loan approvals rose for the fourth consecutive month in May, climbing from 43,191 in April to reach a 13-month high of 43,414.<br /><br />But net mortgage lending rose by only &pound;324m in May, the most modest monthly increase since records began in 1993 and well below both April&rsquo;s rise of &pound;900m and the six month average of &pound;1.1bn.<br /><br />Gross mortgage lending fell to &pound;10.6bn in May, the least since 2000, from &pound;10.9bn in April, the Bank of England said.<br /><br />Liam Bailey, property analyst at Knight Frank, said the figures proved that banks were still operating a cautious lending policy.<br /><br />&ldquo;Lenders are still nervous about a market that they still see as slightly overvalued. Until you get several months of rising prices, they won&rsquo;t want to lend into the property sector,&rdquo; he said.<br /><br />He added that as long as banks are only lending to the &ldquo;safest&rdquo; customers, the property recovery would be delayed.<br /><br />Fears over the dearth of home lending came just a day after a Hometrack report showed that a 20-month trend of falling house prices was beginning to level out, due to increased demand versus a lack of supply.<br /><br />But despite the surge in demand, the Bank said in its Financial Stability Report last week that banks had curbed lending to all but the most reliable borrowers, sparking fears that a credit squeeze will constrain UK economic recovery.<br /><br />However, the Bank&rsquo;s figures showed that consumer credit was up by &pound;300m, in line with the six-month average.