Mortgage approvals in April fell to levels last seen in the depth of the house price fall more than two years ago, while lending to the nation’s businesses also contracted, latest data show.
The British Bankers’ Association said the number of loans approved for house buying slipped to 29,355 in April, down from 31,205 in March and below the 29,956 average of the previous six months. Re-mortgage activity also slipped to its lowest level since January 2010.
Falling demand for mortgages is often associated with weak house prices.
Lending to the nation’s private non-financial companies, which form the backbone of the economy, contracted by a further £500m in April.
It was less than the £3.2bn drop in March and the £1.3bn average monthly decline seen over the previous six months but it continues a trend of year-on-year contraction since July 2009.
Year-on-year, credit contracted by 4.5 per cent in April. a rate of decline only slightly lower than in each of the previous three months.
The furore over bank business lending picked up steam this week after it emerged that Project Merlin, a commitment from banks to step up company loans, had fallen short of goals set for the credit extended to small- and medium-sized enterprises (SMEs) for the first quarter of this year.
David Dooks, BBA statistics director, said: “Individuals and business continue to save more, pay off debt and borrow less as uncertainty about the economy has entrenched a ‘wait and see’ attitude.
“Businesses – SMEs in particular – are using cash flow and deposits to fund expenditure rather than taking on more borrowing.”
Recent monthly reports from the Bank of England’s regional agents have offered anecdotal evidence of small business frustration with lenders.
In one recent report, contacts complained that they were increasingly asked to provide personal guarantees for company loans and that being urged to switch to more expensive forms of credit.
Separately, net consumer credit was flat in April, with new spending outstripped by repayments – a pattern that has characterised consumer behaviour in recent months.
Net credit card lending rose by £0.2bn on the month because interest charges on outstanding balances outstripped the value of net repayments.