Net mortgage borrowing from the banks fell by 0.1% over the year to March, the British Bankers’ Association (BBA).
The outstanding level of unsecured borrowing contracted by 1.6% over the last year. Within that, credit card borrowing rose by 6.3% but was more than offset by a contraction of 7.5% in personal loans and overdrafts.
Gross mortgage borrowing of £7.6bn in March was below the recent monthly average.
Historically, the difference between gross borrowing and capital repayment produced positive net borrowing data each month. With lower levels of gross borrowing and high capital repayments being maintained as a benefit of interest rates remaining low, net borrowing gradually reduced to a flat balance last spring and has remained weak.
March saw mortgage approvals for house purchase and remortgaging edging up back to levels in March last year. The expectation of more first-time buyers looking to enter the market in 2013 will help mortgage chains in due course. The average house purchase approval rose to £152,500.
[pullquote]Gross mortgage borrowing was below the recent monthly average[/pullquote]
Approvals in March for other loans were some 34% lower than in March 2012, no doubt reflecting lower levels of equity available and reluctance to take on extra borrowing.
BBA statistics director, David Dooks said: “The Funding for Lending Scheme has made the mortgage market more competitive – allowing smaller institutions to offer attractive rates. But nevertheless the main high street banks still provide 60% of new mortgage borrowing.
“Mortgage approvals edged up back to levels of a year ago and the prospect of more first time buyers entering the market during 2013 is likely to help mortgage chains in due course. However, economic uncertainty and subdued confidence continues to determine borrowing behaviour, with households and businesses reducing borrowing and building up deposits where possible.”
[pullquote]”We remain some way off a sustained recovery in the housing market” Mark Harris[/pullquote]
Mark Harris, chief executive of SPF Private Clients, said: “Mortgage approvals for purchases and remortgaging edged upwards reaching similar levels to those seen this time last year but that was before Funding for Lending was introduced. While the FLS has driven down mortgage rates and made more products available it still isn’t feeding through to a significant increase in lending volumes, which partly explains the Bank of England’s decision to extend the scheme. We welcome this news as it means more money should be available from more providers, making it easier for businesses and individuals to access competitively-priced funds.
“The figures show that we remain some way off a sustained recovery in the housing market as caution continues to prevail. However, mortgage brokers and estate agents report that they are the busiest they have been since the downturn so we expect this to feed through to improved official figures in coming months.
“Borrowers continue to overpay on their mortgages, taking advantage of record low interest rates, and pay down debt where they can. This makes sense – why leave savings languishing in accounts paying such poor rates of interest when you can reduce your borrowing instead? There is also a reluctance to take on extra borrowing because of the uncertain economic and jobs climate.”