Slowdown in UK mortgage lending

Fewer people took out mortgages in May, the CML says

Mortgage lending slowed sharply in May, figures from the British Bankers' Association (BBA) have shown.

Lending rose by £4.9bn, the lowest rise since November last year, and significantly lower than April's record £6.4bn increase.

The news was supported by the Council of Mortgage Lenders latest data which showed advances fell by £1bn in May.

Despite the apparent slowdown, the BBA said it would be "premature" to conclude that the market was cooling.

Recent surveys from the Halifax and Nationwide have shown house prices are still charging ahead.

However, the lending figures could provide some comfort to the Bank of England which has been concerned about consumer debt.

The slowdown in mortgage lending in May will be very welcome news to the Bank of England Howard Archer, Global Insight

"After several months of buoyant mortgage lending, it would be premature to conclude, just on the basis of weaker lending in May, that the market is moderating," said BBA director of statistics David Dooks.

"Consumer credit overall was much in line with the current average, with credit card lending being slightly stronger than average and other loans slightly weaker," he said.

Rate relief

The latest data from the CML showed total advances for the month dropped to £23.8bn from £24.8bn in April.

"The slowdown in mortgage lending in May will be very welcome news to the Bank of England," Global Insight economist Howard Archer said.

"It at least increases the scope for the Bank to hold off from raising interest rates again in July, while it tries to ascertain if successive 25 basis point interest rate hikes in May and June had any more of a dampening impact on the consumer and the housing market."

Many expect the housing market to slow following recent rises in UK interest rates.

The Bank of England has raised rates by a full percentage point since November last year and the base rate now stands at 4.5%.

The Bank has denied that it is targeting house prices directly with the rate rises. However, it has said that surging prices could drive spending and growth higher, and ultimately lead to a steeper rise in inflation.