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Home loan growth slows down
By Fiona Shaikh
London (Reuters): Mortgage lending growth steadied at its weakest rate in a nearly a year in March, suggesting higher borrowing costs and rising prices may finally be taking their toll on the housing market.
The British Bankers Association (BAA) said underlying net mortgage lending rose by £5.1 billion in March, the same as February's downwardly-revised figure, which was the weakest since April 2006.
The BBA said the March figure may have been skewed slightly by a strong reading a year ago, but was below the recent average of £5.5 billion.
The housing market has shown resilience in recent months to three official interest rate rises since last August to 5.25%, but Monday's data adds weight to recent survey evidence suggesting the market may be starting to cool.
Mortgage approvals figures from the Building Societies Association released at the same time also suggested demand may have peaked. Its data showed approvals for home loans totalled £4.830 billion in March, the lowest since November.
Analysts said the slowing trend was likely to continue, especially as the Bank is almost certain to raise its benchmark rate to 5.50% next month and possibly again after that.
"Housing market activity seems likely to moderate over the coming months as another rise in interest rates in May adds to affordability pressures," said Howard Archer of Global Insight. "Furthermore, there is a very real risk that interest rates could rise further still after May's probable increase, which will be a major worry to potential house buyers."
BSA figures showed net mortgage lending reached its highest level in three years in March, at £2.109 billion.
The Council of Mortgage Lenders, meanwhile, said gross mortgage lending reached a record high for the month of March, at £31.260 billion.
But unsecured lending fell by £200 million in March, similar to the fall in February, the BBA said. Credit card lending accounted for half of this fall, with loans and overdrafts virtually unchanged, it said.
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