Remortgaging drops as house purchase approvals remain static

Published 23rd Jun 2011

Latest figures from the BBA show a decline in remortgaging as the likelihood of an interest rate rise recedes


Britain's banks have reported a big drop-off in remortgaging activity as expectations of an interest rate rise begin to fade.

The British Bankers' Association (BBA), whose members account for two-thirds of all UK mortgage lending, said its figure of 21,519 approvals for remortgages in May was well down on the average of 24,571 for the previous six months.

The figures contradict those from the Council of Mortgage Lenders, which earlier this week said remortgaging had supported a rise in gross mortgage lending in May.

House purchase approvals were slightly higher than in April, rising to 30,509 from 29,747, but remained 15% lower than a year ago. The average value of £147,700 was 1.9% lower than May 2010.

Many homeowners were prompted to seek fixed-rate mortgages earlier this year amid expectations of an imminent rise in the Bank of England's base rate. But recent economic uncertainty now means many economists are not expecting rates to rise until next spring.

The BBA said gross mortgage lending was largely stable, but with homeowners stepping up repayments amid the low interest rate environment net mortgage lending increased by just £1.2bn in May.

Demand for loans and unsecured borrowing, meanwhile, has remained weak, with repayments continuing to outweigh new lending while the squeeze on household finances meant deposits and savings rose by just £100m compared with £800m in April and an average of £1.9bn over the previous six months.

BBA statistics director David Dooks said: "Consumer spending was flat in May after the boost Easter and the royal wedding provided in April. Money is still tight and people continue to pay off debt rather than save or borrow."

Source: ' Guardian '

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