Growth in mortgage lending by the UK's leading banks last month was weaker than at any point for almost a year, figures from the British Bankers’ Association show.

May saw gross mortgage lending total £14.7bn, says the report. A good proportion of this represented remortgaging activity, because when repayments and redemptions are stripped out, the rise in net lending, of £4.6bn (seasonally adjusted) was the weakest monthly rise since last July.

In total, there were 245,100 mortgage loans approved in May, 4% fewer than in April. Compared to the same time a year ago, the numbers of loans approved for remortgaging and equity withdrawal were higher, though in sharp contrast, house purchase loan approvals were significantly weaker. The average house purchase loan value rose to £94,100, some 6% higher than a year earlier.

Total consumer credit rose by £0.7bn net in May, compared to +£0.8bn in April and +£0.9bn in March.

David Dooks, director of BBA statistics, said:

"As well as the substitution of secured borrowing for unsecured finance, the effect of borrowers switching between alternative forms of consumer credit means that focussing on one particular aspect can be a misleading guide to overall personal sector debt.”

“Stronger borrowing on credit cards in May was offset by only a marginal increase in personal loans, so that the overall rise in consumer credit was lower than in the previous two months.”

“The strength of gross mortgage lending can also be misinterpreted. Remortgaging inflates the gross figures but, if it occurs between the major banks, it has no effect on their aggregate net lending figures.”

“The banks' weaker rise in May's net lending is therefore a reflection of lower housing activity or the competitiveness of the marketplace. With approvals of loans for house purchase 20% lower than in May last year, this picture seems likely to continue in the short-term.”

“The overall picture in May was therefore one of moderating demand from consumers."

Mortgage Lending

Gross lending totalled £14,744mn in May, some 8% more than in April.

May's seasonally adjusted rise of £4,641mn in net lending was 10% lower than in April and below the average of +£5,070mn over the previous six months.

Compared to May 2002, there were 24% fewer loans approved for house purchase ( 20% by value), 9% more re mortgages (+24% by value) and 16% more equity withdrawal loans (+20% by value).

Consumer Credit

New borrowing on credit cards totalled £6,588mn in May, just 1% more than in May 2002. However, as repayment levels were lower than spending levels in the month, a strong seasonally adjusted increase in net lending of £503mn resulted.

New lending on personal loans and overdrafts totalled £2,943mn, 14% less than in May last year. After seasonal adjustment, net lending was very subdued, rising by only £156mn.