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BoE figures show mortgage lending continues to fall

Mortgage lending reached £6.4bn in April, lower than the March figure and the previous six-month average, according to the Bank of England.

Total net lending in April only reached £7.3bn, which is also lower than that recorded in March as well as the previous six-month average. The 12 month growth rate slowed to 8.4 per cent and the three month annualised growth rate slowed by 0.3 per cent to 7.1 per cent.

The 12 month growth rate for home loans slowed further, to 8.7 per cent while the three month annualised growth rate slowed by 0.4 per cent to 7.0 per cent. Only 58,000 loans were approved for home purchase in April and 52,000 loans were approved for other purposes. These figures are lower than in March but the number of loans approved for remortgaging, 106,000, was higher than the March figure.

Propertyfinder.com major client director Nicholas Leeming says the Bank of England needs to take immediate steps to free up liquidity in the wholesale markets.

He says: “The housing market is being choked by the lack of mortgage availability. The MPC has tried to breathe life into the market with interest rate cuts but they have been unsuccessful in thawing the capital markets and lenders continue to put up mortgage rates – freezing out borrowers. Housing transactions have fallen to levels not previously seen and it’s essential for the health of the economy that the Bank of England takes immediate action. Bank base rate has become redundant to the cost of loans and inflation has left the MPC little room for further manoeuvre in any case. The Bank of England must take immediate steps to free up liquidity in capital markets, encouraging increased mortgage lending.”

Liberal Democrat Shadow Chancellor Vince Cable says: “We are now seeing a massive hangover from the housing boom that was built on a binge of cheap credit. With house prices falling, food and fuel costs rising and the continuing credit crunch making borrowing less affordable, it is no surprise that the housing market is grinding to a halt. The housing market has become seriously overvalued and a correction is both necessary and inevitable. With many families now struggling to make ends meet, it is essential that we prevent the level of mass repossessions we saw during the Tory recession of the 1990s, which lead to a crash in house prices. A binding process for all lenders must be created to ensure that repossession is only ever used as a last resort.”

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