High Street banks wrote fewer mortgages last month than at any time since April last year, underscoring suggestions that the economic recovery is losing traction.
The British Bankers’ Association (BBA) said yesterday that the number of mortgage approvals fell by 22.3 per cent in August, measured against the same month last year. A total of 31,767 applications for home loans were accepted, down from 34,219 in July.
Mortgage approval data are the latest in a line of economic indicators published in recent weeks suggesting that the economic recovery is flagging. The latest update from the BBA is also likely to attract the ire of the politicians, who have accused the banks of not doing enough to support the recovery after last year’s recession.
But the BBA said that the downturn in mortgage lending was due to a lack of interest among potential buyers. “Demand for mortgages continues to be weak despite more properties reportedly coming on to the market,” said David Dooks, the BBA’s director of statistics. “Even with stable or falling house prices, the current economic climate makes it unlikely that demand will pick up in the near future.”
The latest figures come less than a month before the Coalition unveils its Comprehensive Spending Review, which is expected to see some departmental budgets cut by as much as 40 per cent. Several economists have warned that the cuts, and the consequential fall in consumer confidence, risk stymieing the recovery.
“Consumer appetite for new taking on new borrowing clearly remains limited while there is an ongoing desire of many consumers to reduce their debt,” said Howard Archer, chief economist at IHS Global Insight. “This is the consequence of a still relatively uncertain and worrying longer-term economic outlook, highlighted by the major fiscal squeeze that will increasingly kick in over the coming months.”
The BBA also revealed that lending to non-financial businesses also fell, by £1bn in August.Reuse content