Lending fell in January according to the latest research from the Council of Mortgage Lenders and the Department of Environment, Transport & Regions.
Although lending fell from £9.8bn in December to £7.2bn in January, this is expected to be a seasonal downturn rather than an indication of a slowdown in borrowing, as levels are still over £1bn higher than the start of 1999.
Figures from the Building Societies Association and the British Bankers Association told a similar story. Building Society advances fell from £1.88bn in December to £1.38bn in January.
Adrian Coles, director-general at the BSA attributed this to recent interest rate hikes.
He said: “The interest rate rise by the Bank of England in January may have some effect in slowing building society lending, an effect that may be repeated following the most recent rise. However, building societies are still holding their share of the mortgage market and we expect to see a growth of activity in the spring.”
According to the BBA, the major banking groups saw gross lending fall by 22%, bringing it to the lowest level since spring last year. Loans approved for home improvements and equity release also fell in January, accounting for £425m in value, 11% lower than December and the lowest figures for a year.
The CML/DETR survey found fixed rate loans appear to be popular, accounting for 42% of all loans compared with 34% in December as a result of rising interest rates. The average new fixed rate was 6.05% while the average variable rate was 5.76%.
Michael Coogan, director general at the CML, said: “Loan to value ratios remain conservative, so even if rates do rise further mortgage payments should remain affordable, even if people have not chosen a fixed rate.”