MORTGAGE lending crashed to a record low in August, the British Bankers Association (BBA) said yesterday, with borrowers actually paying back more than they took out.
Net lending hit negative territory for only the second time since the BBA started recording the data in 1997, the data revealed. The first negative reading was May this year.
During August, the net change in amounts outstanding fell £284m, having grown £96m in July and £149m in June after May’s £186m fall, on the seasonally adjusted figures.
This reflected an underlying increase in mortgage lending that was much weaker than usual for August – £231m compared to £1.3bn in August 2011 and £1.9bn the year before that.
BBA statistics director David Dooks put the figures down to low consumer confidence. “People are acting conservatively in this weak economic environment, maintaining debt repayments and building up deposits,” Dooks said.
And analysts were uncertain whether government initiatives, such as Funding for Lending (FLS), could have a significant impact on the market. “There is already much debate whether [FLS will] help out those borrowers who really need assistance,” commented Mark Harris, boss of mortgage broker SPF Private Clients.
Howard Archer at IHS Global Insight predicted that weakness in housing demand would pull prices down over the coming months.