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U.K. mortgage lending hits low in April

Robert Barr
AP Writer

London (AP) — Net mortgage lending in Britain hit the lowest level in eight years in April while savings growth remained subdued, the British Bankers Association said Wednesday, suggesting the Bank of England’s massive cash injections into the economy have yet to boost credit activity.

That was echoed in a statement by a major mortgage lender, which said it saw no decisive upturn in the housing market and that it expects mortgage and savings markets to contract in 2009-10.

The BBA said net lending was 2.7 billion pounds, or $4.3 billion, in April, compared to an average of 3.4 billion pounds in the previous six months. The March figure was 3.4 billion pounds.

Gross mortgage lending of 7.9 billion pounds was down from 8.7 billion pounds in March, and 52 percent below a year ago.

Both the gross and net figures were the lowest since March 2001, the association said.

The value of house purchase mortgages approved edged up in April, but was 30 percent below year-ago levels.

“The house purchase part of the mortgage market appears to have stabilized, with slightly more approvals coming through, although April’s weak net mortgage lending reflects the lower number of approvals in previous months,” said David Dooks, statistics director for the association.

The Bank of England announced on May 7 that it would increase its spending on quantitative easing — a program to inject money into the economy. It also extended the program, which was due to expire at the end of this month, for an additional three months.

Brigid O’Leary, economist at the Royal Institution of Chartered Surveyors, said the rise in mortgage approvals in April only partly reversed the drop in March.

“As yet, there are few signs that the massive stimulus from the Bank of England is having a marked effect on mortgage lending, and the increase in new buyer enquiries, as reported in the RICS housing market survey, is clearly still being stifled by restricted lending conditions,” O’Leary said.

“The extended quantitative easing program, combined with the availability of government guarantees for asset-backed securities, may go some way to improving the situation in the next few months,” she added.

The Nationwide Building Society, the U.K.’s third-largest mortgage lender, was less optimistic as it reported a 67 percent drop in full-year earnings.

“We expect both the U.K. household savings market and U.K. mortgage market to contract in 2009-10, taking the net mortgage market into negative growth,” Nationwide said.

It said high levels of unemployment and stagnant wage growth would limit the pace of recovery.

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