Mortage lending by Britain's big banks slowed in February, adding to the evidence that the housing market is heading for an even deeper slump after the two mortgage rate rises since September
The British Bankers' Association said net mortgage lending rose £597m after adjusting for seasonal variations - nearly 9 per cent lower than the previous month's figure and 5 per cent down on the year.
Tim Sweeney, director-general of the BBA, said: "It is clear that confidence in the housing market remains low." With another reduction in mortgage interest relief imminent, he said it was surprising that lending had not been more depressed. The banks' mortgage loan book is 7 per cent higher than a year ago but the pace of growth is slowing significantly. There are signs this trend will continue.
The number of new mortgages approved by banks in February, 23,020, was lower than in the same month the previous year for the first time in six months. The same was true of the value of new loan approvals, at £1.13bn compared with £1.15bn the previous February. The average value of approved loans was £49,000, barely higher than a year earlier.
The bank lending details follow building society figures that showed an even sharper fall last month. New loans by building societies in February were 17 per cent lower than a year earlier.
The BBA banks - which account for almost all of bank mortgage lending - therefore held their own a little better than the building societies in February, although their respective market shares have been roughly stable for some months.
Ian Shepherdson, economist at HSBC Markets, estimates that the total number of new mortgage commitments by banks and building societies, after seasonal adjustment, fell to 70,000 last month - 12.5 per cent lower than in January.
He predicted house prices could have reversed last year's small gain by the middle of this year, and would fall more if the worst fears of rises in mortgage rates were realised.