UK mortgage lending slows in December

The UK mortgage market experienced a slowdown in December, with lending falling significantly from its record level of the month before, according to figures released by the British Bankers' Association (BBA).

The BBA, which published its monthly report on lending by the major British banks today, said that lending secured on dwellings - that is, mortgages - stood at ?5.08bn in December, down from ?5.8bn in November and ?5.6bn in October.

However, Steven Pitkeathley, executive director of the BBA, was quick to point out that December's slowdown could just as easily be a one-off as a harbinger of things to come. "Whether slower mortgage growth in December was because homebuyers were backing away from current property prices or whether equity withdrawal is moderating remains to be seen," he said. "One month's figures cannot be viewed reliably as a trend change."

The Council of Mortgage Lenders (CML), who also released their monthly figures today, also reported a slight decrease in lending over December. However, they saw 2002 overall as being a record year for the mortgage sector, with the final figure for lending at a record ?219bn. The CML said it expected lending to remain strong well into the spring, but predicted a slowdown in growth later in the year as house price inflation eases.

Alex Bannister, Nationwide building society's group economist, was also cautious in his reaction to the figures. "These figures do not represent a dramatic slowdown," he said. "They will probably pick back up again in the next few months. This is not to say we don't expect to see a slowdown in the market over the next year, but this isn't it."

Elsewhere in the lending market, borrowing on credit cards during December remained in line with previous months, increasing by ?306m.

However, other unsecured lending, including personal loans and overdrafts, soared by ?851m - although the severity of this rise was mitigated somewhat by the fact that it followed November's rise of just ?382m, the smallest since September 2000. Mr Pitkeathley gave another possible explanation for the figures: "It seems that in spite of some predictions, consumer borrowing, particularly on cards, didn't go overboard at Christmas, with people preferring to use their cash or deposits for spending."