UK mortgage lending edges higher

Mortgage lending has been sluggish in 2010

Mortgage lending crept up in April compared with the previous month, according to the Bank of England.

The number of mortgages approved for house purchases increased to 49,871 in April from 49,008 in March, a rise of 2%, the Bank's figures showed.

Meanwhile, UK consumers paid back more than they borrowed in April, with the net level of unsecured credit falling by £136m.

This was the first time that the level had fallen since November.

Housing

The Bank's figures show the continued sluggish nature of the housing market in 2010.

The number of mortgages approved for house purchases in April was only slightly higher than the 45,529 of the same month a year ago, and it was lower than the average of the past six months.

Mortgage approvals hit a recent high in November - at 59,531 - just before the end of the temporary stamp duty holiday.

"The data is likely to reflect both the continuing shortage of mortgage funding and weak consumer confidence, and therefore demand," said Michael Coogan, of the Council of Mortgage Lenders (CML).

"The forthcoming Budget represents an opportunity for the government to prioritise support for home-owners, although we recognise the fiscal position leaves only limited room for manoeuvre."

He said that the CML might revise its forecast for the amount of mortgage lending in 2010. It had suggested that gross lending would reach £150bn this year, with net lending at £15bn.

"Nobody can deny that the mortgage and property markets are still very delicately balanced," said Brian Murphy, of mortgage broker the Mortgage Advice Bureau.

The number of approvals for remortgaging remained low, with many homeowners sticking with their standard variable rate.

However, the continued low level of interest rates is putting pressure on lenders.

Since 1 June, new mortgage borrowers with Lloyds TSB, as well as Cheltenham and Gloucester, must pay a much higher standard variable rate (SVR) when their initial deal expires.

Current borrowers revert to a SVR of just 2% above bank rate, so are currently paying 2.5%. But now new borrowers, or current ones who switch deals, will have to revert to an SVR without any ceiling, currently set at 3.99%.

Building societies

Figures from the Building Societies Association showed that the amount saved in mutuals outweighed the amount withdrawn for only the second month in the past year.

Savings rates have been at low levels since the recession

The net inflow of savers' money stood at £537m in April, compared with a net outflow of £318m the previous month.

"Mutuals have been able to attract savers by offering competitive rates, especially on popular Isa [Individual Savings Account] products," said Adrian Coles, director general of the Building Societies Association.

"However, maintaining positive inflows will remain a challenge while the Bank rate remains low as savers may seek higher returns elsewhere, albeit at greater risk, or may opt to repay debt instead."

The Bank of England figures show that the repayment of personal loans and advances led to the drop in net unsecured credit.

Credit card borrowing rose slightly in March, but there remained evidence of people taking a safe approach to their finances owing to the uncertain state of the economy.

The Bank of England figures show that total net lending to individuals rose by £0.4bn in April.