Although gross mortgage lending in February was subdued, it reflected the usual seasonal pattern, according to David Dooks, director of statistics at the British Bankers’ Association (BBA). However, the volumes of loans approved for house purchase in the month, suggest that a buoyant lending picture will return in the near term.

The statement came following last week’s release of MBBG net lending figures for February, when further information available on lending to individuals shows that:

• Gross (new) mortgage lending totalled £13.5bn in February. February is usually the slowest month of the year, so the fact that new lending was lower than in January was largely expected. With a higher level of redemptions (reflecting people switching between lenders), the resulting rise in net lending was £5.4bn, very much in line with the recent average monthly rise.
• February also saw the traditional resurgence of loan approvals for this time of year. There were 216,400 loans approved, with a total value of £15.4bn. Increasing activity in the housing market was reflected in the proportion of loans approved for house purchase rising to 34% (from 31% in January) and the average approval rising to £103,400.
• Growth in net consumer credit was very similar to that of recent months, rising by £0.7bn (seasonally adjusted). Though the credit card element was the strongest since September, this was offset by reduced demand for personal loans and the use of overdrafts, which in total saw the smallest rise since last May.

David Dooks, BBA director of statistics, said:

“Relatively subdued gross mortgage lending in February reflected the usual seasonal pattern, though the volumes of loans approved in the month, particularly for house purchase, suggest that a buoyant lending picture will return in the near term.”

“In seasonally-adjusted terms, consumer credit is rising at a steady rate overall. Over the last two months, although growth in credit card borrowing has been stronger, this has been offset by reduced demand for personal loans and overdrafts and reflects individuals switching between affordable or convenient options from the wide range of alternatives.”

Mortgage Lending

February’s gross lending of £13,548mn was 5% less than January’s total and compared with a total of £11,682mn in February 2003.

The seasonally adjusted rise in February’s net lending was £5,449mn, in line with the trend average of +£5,500mn over the previous six months.

Compared to the same month a year earlier, February’s approvals of house purchase loans were 27% higher by number and 56% by value; remortgaging loans were 2% higher by number and 11% by value; and equity withdrawal loans were 2% lower by number, though 13% higher by value.

Consumer Credit

New borrowing on credit cards totalled £6,851mn in February. Though some 2% less than in January, after allowing for interest charging and repayments, the seasonally adjusted increase in net lending was £349mn, the strongest monthly rise since September.

New lending on personal loans and overdrafts, at £2,995mn, picked up from the seasonally low January figure. After seasonal adjustment, the rise in net lending was £337mn, well below the average rise of £500mn over the previous six months.