Credit crunch takes further bite out of mortgage lending

Latest figures from the BBA (British Bankers' Association) show mortgage approvals falling to 35,417 last month from 43,147 in February. That's the lowest figure since September 1997 and represents an annual fall of 46.2%. Overall mortgage approvals, including refinancing and equity withdrawal, fell to their lowest since 2000.

David Dooks of the BBA said the consequences of low banking sector liquidity have shown up clearly in the March data - reduced product ranges and tighter criteria resulting in slower mortgage lending and significantly fewer loan approvals.

"Pressures on personal finances are also constraining demand, not only for mortgages, but also for personal loans and borrowing on cards'" he added.

Elsewhere, annual growth in credit card borrowing increased slightly to 6.5%. Repayments continued to outstrip new spending, as they did throughout 2007, so growth largely reflects interest charging.

Annual growth in loans and overdrafts fell slightly to 5.2%, although overdrafts increased slightly in March after falling the previous month.

Meanwhile, minutes from the latest meeting of the Bank of England's interest rate setting committee show expectations of unanimous agreement for the latest cut in interest rates proving to be wide of the mark.

In fact, the committee was split three ways - six members voting in favour of the 0.25% cut to 5%, but members, Andrew Sentence and Tim Besley opting to keep rates on hold. The final member, David Blanchflower, was in favour of a half point cut to 4.75%.

23 April 2008 © Moneyextra.com

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