Mortgage demand eases as interest rates rise

Latest figures March from the BBA British Bankers' Association show that mortgage demand may be weakening in the face of rising interest rates.

March's gross mortgage lending was £18.6 billion, 5% more than the £17.7 billion in March 2006. And there were 198,000 mortgages approved for all purposes during the month; some 8% lower than in March 2006. However, the average loan approved for house purchase was £150,800, some 12% higher than a year earlier.

Underlying net mortgage lending gross lending minus repayments and redemptions rose by £5.1 billion, similar to February's increase, but less than the recent average of £5.5 billion. The annual growth in net mortgage lending continued to stay around 14%.

Elsewhere, credit card borrowing fell by £0.1 billion net in the month, while borrowing on personal loans and overdrafts was largely unchanged.

David Dooks, BBA director of statistics, makes the point that strong levels of gross mortgage lending reflect homebuyers and homeowners seeking out fixed rate mortgages as protection against rising interest rates.

Dooks adds that as people continue to reduce their commitments, weaker spending on credit cards and lower new loan borrowing than a year earlier led to another overall fall in personal borrowing.

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2007-04-30 12:32:04 © Moneyextra.com