Bank holiday weekends hit mortgage markets

Activity in the mortgage market slumped during April as the extended bank holiday weekends distracted people from their moving and remortgaging plans, figures showed today.

The number of mortgages approved for house purchase dropped by 4% during the month to 45,166, the lowest level since December, when the market was hit by bad weather - and the second lowest since March 2009, according to the Bank of England.

Approvals for people remortgaging also dived by 10% to a level last seen in July last year, with just 28,091 loans approved during the month as the threat of an imminent interest rate rise receded.

Net lending, which strips out redemptions and repayments, rose slightly compared with the previous month but remained muted at £739 million, well down on pre-credit crunch levels of more than £9 billion a month.

The figures were broadly in line with data reported by the Council of Mortgage Lenders and the British Bankers' Association, both of which showed a fall in activity during April.

The CML said total mortgage advances had dropped by 14% during the month, while the BBA said the number of mortgages approved for house purchase had fallen by 6% and there was a 12% slide in remortgage approvals.

It remains to be seen whether the drop-off in activity during April simply reflected the long bank holiday weekends, or whether it signals the start of a new downturn, as people worry about the state of the economy and Government spending cuts start to kick in.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "The relapse in mortgage approvals in April from an already low level reinforces our belief that modest falls in house prices are more probable than not over the coming months."

But Brian Murphy, head of lending at mortgage brokers the Mortgage Advice Bureau, said: "The raft of bank holidays and the royal wedding inevitably skewed the April data, so an overall drop in the number of loan approvals and remortgages comes as no surprise.

"During May, activity bounced back and returned to the steady growth trajectory of February and March, albeit one that is naturally still at historically low levels."

Unsecured borrowing was broadly unchanged from the previous month, rising by a subdued £504 million.

Within the total, credit card lending rose by £347 million, well up on the rise of £195 million in March, but borrowing through loans and overdrafts dropped to £157 million, compared with £321 million the previous month.

Conditions continued to be challenging for building societies, with net mortgage lending contracting for the 28th consecutive month, as customers repaid £462 million more than was advanced to new borrowers.

But there was better news on the savings front, with the amount of money held by mutuals rising by £983 million during the month.