Britain's banks have reported a big drop-off in remortgaging activity as expectations of interest rate rises begin to fade.
The British Bankers' Association (BBA), whose members account for two-thirds of all UK mortgage lending, said its figure of 21,519 approvals for remortgages in May was well down on the average of 24,571 for the previous six months.
House purchase approvals were slightly higher than in April at 30,509 but 15% lower than a year ago. The average value of £147,700 was 1.9% lower on May 2010.
Many homeowners were prompted to seek fixed-rate mortgages earlier this year amid expectations of an imminent hike in the Bank of England's base rate from a record low of 0.5%. Recent economic uncertainty now means many economists are not expecting rates to rise until next spring.
The BBA said gross mortgage lending was largely stable but, with homeowners stepping up repayments amid the low interest rate environment, net mortgage lending increased by just £1.2 billion in May.
Demand for loans and unsecured borrowing has remained weak, with repayments continuing to outweigh new lending, while the squeeze on household finances meant deposits and savings rose by just £100 million, compared with £800 million in April and the average of £1.9 billion over the previous six months.
BBA statistics director David Dooks said: "Consumer spending was flat in May after the boost Easter and the royal wedding provided in April. Money is still tight and people continue to pay off debt rather than save or borrow."