April 21, 2011
U.K. mortgage lending
fell in March, and demand may decline further in the second quarter as the housing market weakens and consumers brace for a government spending squeeze, the Bank of England said.
Gross home loans issued last month totalled 9 billion pounds, down from 9.2 billion pounds in February, the central bank said in its monthly assessment based on data from six banks. Net lending fell to 600 million pounds from 700 million pounds over the same period.
“In recent discussions, some lenders reported expectations of subdued lending for house purchase in coming months,” the Bank of England said in its quarterly Trends in Lending report.
Recent data have shown a mixed picture of the housing market, with banks curtailing lending and the prospect of the tightest government budget squeeze since World War II casting a shadow over the economic outlook. While policy makers held their key interest rate at a record low this month, three officials have called for higher rates to tame inflation, a move that could put further pressure on the property market.
The number of home loans approved rose to 44,000 in March from 43,000 the previous month, the bank said. That’s only about half the long-term average and below the 51,000 granted in the same month a year ago.
“Household demand for secured lending for house purchase fell in line with expectations” in the first quarter of this year, the central bank said. It’s “expected to fall further over the next three months.”
U.K. house prices fell in March as banks reported weakening demand, Research Company Acadametrics Ltd. and LSL Property Services Plc said on April 8.
Lloyds Banking Group Plc’s Halifax unit earlier this month reported that home values slipped 0.1 percent in March and said uncertainty over the economy is “likely to constrain housing demand, resulting in some modest downward pressure on prices.” It expects home prices to drop 2 percent this year.
The Bank of England held its benchmark interest rate at a record low of 0.5 percent on April 7 and its bond-purchase program at 200 billion pounds as policy makers assessed signs the economic recovery is slowing.
The mortgage-approvals data published today is based on reports from Banco Santander SA, Barclays Plc, HSBC Holdings Plc, Lloyds Banking Group Plc, Nationwide Building Society and Royal Bank of Scotland Group Plc.
Keep up with the latest uk financial information at the Secured Loan Centre