Gross mortgage borrowing of £7.7bn in January was above the recent monthly average. Historically, the difference between gross borrowing and capital repayment produced positive net borrowing data each month. With lower levels of gross borrowing and high capital repayments being maintained as a benefit of interest rates remaining low, net borrowing gradually reduced to a flat balance through much of 2012.

In January, mortgage approvals for house purchase were 14% lower than in January last year, no doubt reflecting the impact of the weather on housing activity. 2012 ended with reports of more first-time buyers looking to enter the market, which will help mortgage chains in due course. The average house purchase approval dropped to £145,300. Approvals in January for remortgaging and other loans were some 28% and 36% respectively lower than in January 2012.

BBA statistics director, David Dooks said:

January’s severe weather impacted adversely on what was already a subdued picture of borrowing demand from households and businesses. While general economic growth stalls, low consumer and business confidence generates a natural tendency to restrain borrowing appetite, repay borrowing where possible and to build up cash and savings as a buffer.

Chris Love, a director at independent mortgage broker, Mortgage Simplicity, commented:

“The weather will have certainly impacted mortgage approvals in January. Viewings were massively restricted and this will naturally impact the number of mortgages applied for and approved in principle. The fact that house purchases in January are up on the six-month average shows that there is a degree of momentum in the market. There’s still caution but things are slowly but surely improving.

“The Funding for Lending Scheme has definitely kickstarted the market. Two, three and five-year average fixed-rate mortgages are now at their lowest level since their launch in 1989, with record-beating rates arriving daily in some cases. In the past week, a major building society has launched what has been hailed as the lowest ever five-year fixed rate at 2.64%.

“There’s no doubt that lenders are starting to play ball again. Bath Building Society has launched a 100% 3-year fixed rate guarantor mortgage to help would-be first-time buyers get a foot on the property ladder. Kent Reliance has introduced a series of buy-to-let products available to brokers across the standard, specialist and large loan markets up to 85% loan-to-value. This shows that criteria as well as rates are being relaxed.

“The effect of the Funding for Lending scheme is still being felt most in the low loan-to-value sector, but it is certainly now working up to higher loan-to-value offerings. High rents are stimulating the property market. In many cases it can be a lot cheaper to buy than to rent and this is spurring people into action. First time buyers and buy-to-let investors have been particularly active over the past year.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, says:

“As with the CML lending figures for January, the BBA figures show a more subdued market which might be blamed on the bad weather. We would have expected stronger figures because of the excellent mortgage rates now available as a result of the FLS; it goes to show that we remain some way off a sustained recovery in the housing market as caution continues to prevail.

“Last year, net borrowing was largely flat as borrowers continued to overpay on their mortgages where possible, while new lending remained muted. This trend is likely to continue as borrowers exercise caution when taking on new borrowing, while low interest rates mean savings are earning such poor returns that homeowners are choosing to pay down the mortgage instead.

“However, while recovery is taking its time, the FLS is supporting the market, with more choice of mortgages at lower rates. The BBA reports an uptick in first-time buyers at the end of last year as more deals become available at higher loan-to-values and at more competitive rates. This is excellent news as first-time buyers are so crucial to the overall health of the housing market.”