Gross mortgage lending hits £12.2bn in April as RBS mulls income cap on lending in London

27th May 2014

Gross mortgage lending hit £12.2 billion in April with net lending of £1.1 billion according to the latest British Bankers’ Association statistics.

This is the highest monthly gross lending since August 2008, and 52% higher than a year ago. House purchase approvals have moderated slightly and are only 25% higher than a year ago.

Business lending contracted by 1.9% over the year to April, though this is an improved picture compared with an annual contraction rate of 5.1% in April last year.

Of the £13.2bn decline in lending to non-financial companies, £9.4bn of that fall was within the buying, selling and renting of real estate.

Richard Woolhouse, Chief Economist at the BBA says:“Our figures show that housing market is mixed.  The value of mortgages taken out in April was the highest for six years however looking ahead mortgage approvals have fallen three months in a row. The amount of borrowing is however still well below the levels we were seeing before the financial crisis.”

RBS is reportedly poised to impose an income limit on lending in London, the banks have been urged to address the problems with the foundations of the housing market.

Lloyds recently said it was limiting its lending to four times income for loans of more than £500,000 saying that this was explicitly because of worries about the overheating London market.

But banks have been criticised for not lending to firms which can improve the supply of property in London.

Duncan Kreeger, director of short-term secured lender West One Loans, said: “Banks are adding extra floors to the property market – but neglecting the foundations.

“Lending to people queuing up to buy a home is growing rapidly.  And quite right too.  But lending to the businesses that can create more homes is still falling.  Mainstream lenders are flogging a lot of mortgages, certainly, but they are still in retreat when it comes to developing and refurbishing new properties – converting buildings into the new homes we need.

“It is totally illogical and it’s bad for the property market – especially in London where supply is so limited.  Fortunately, alternative lenders are not afraid to take on the responsibility.  In the absence of the high street lenders, we’re underpinning the future of the property market.”

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