Recovery in bank lending falters again

The nascent recovery of Britain's housing market continues to look vulnerable, with new data revealing yesterday that there was almost no rise in mortgage lending last month.

The British Bankers' Association said its members approved 35,276 home loans in February, only 122 more than in the previous month and significantly fewer than the average level of around 41,000 over the past few months. The total value of mortgage lending was £4.9bn, down from £5bn in January.

Analysts warned that the data was further evidence that a bounce in the housing market at the end of last year was caused by a shortage in supply and the offer of lower stamp duty rates on certain homes – a tax break that expired at the end of the year – rather than a genuine recovery in the sector.

Howard Archer, chief economist at IHS Global Insight, said: "We would not be surprised if house prices recorded an overall modest drop in 2010." Both Nationwide and Halifax, Britain's two biggest mortgage lenders, have already reported falling house prices this year.

The BBA also said yesterday that lending to companies fell in February, adding further pressure on those banks that have been accused of failing to offer credit to businesses.

Consumer credit was broadly flat, with a small increase in credit card lending that was offset by the number of people paying off overdraft and personal loans.

David Dooks, the BBA's director of statistics, said: "Consumers are focusing on building up their deposits while any increase in borrowing appetite is unlikely without greater household confidence and economic certainty."