Weak market fuels mortgage competition

Homeowners are taking advantage of the slowing property market to negotiate better deals with lenders as competition in the mortgage market intensifies, the British Bankers' Association said today.

The demand for mortgages taken out to buy properties weakened again last month, but remortgaging remained buoyant, accounting for 39% of all loans, the BBA said.

Gross mortgage lending was ?15.1bn in October, ?1.2bn lower than September, and 15.2% lower than in October 2003, the second successive year-on-year fall.

There were 181,150 loans approved last month, with a total value of ?15.0bn.

Approval numbers were 7% down on September and 33% weaker than October 2003. The number of loans approved for house purchase was 1.5% lower than September and 35% lower than October 2003.

Approvals for equity withdrawal were much weaker in October but remortgaging held up, the BBA said. The average approval for house purchase rose to ?113,100, after falling in each of the last three months.

David Dooks, BBA director of statistics, said: "The weakening demand for both mortgage lending and consumer credit seen over the last few months continued in October and weak approvals data suggest that this pattern will be maintained in the short-term.

"With mortgage lending volumes slowing it is not surprising that competition among lenders is intensifying and at the same time, borrowers are looking to reduce their borrowing costs. As a result, re-mortgaging is holding up and accounted for a high 39% of all approvals in October."

The figures follow a wave of indices showing a slowdown in the property market. The latest survey from the Royal Institution of Chartered Surveyors showed the highest number of estate agents reporting a fall in prices since the property crash in 1992.

The Council of Mortgage Lenders said earlier this month that the number of people taking out new home loans had dropped by 10% since September. Property websites Hometrack and Rightmove, along with lenders Nationwide Building Society and Halifax, have all reported house price falls.