Figures from the British Bankers’ Association (BBA) show that just 32,288 mortgages were approved in January, marking a 14% drop compared with the same month last year.
Net mortgage borrowing fell £0.4bn to £7.7bn from December to January, compared with a rise of £0.4bn to £8.4bn from November to December, when a higher number of first-time buyers boosted lending.
The average purchase value also fell to £145,300, prompting gloomy comments from experts.
Speaking to the BBC, Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “As with the Council of Mortgage Lenders’ 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.”
The study showed that borrowers are seeking to pay down debts rather than turn to credit. New spending on credit cards was down £0.4bn from December and demand for loans and overdrafts was “relatively weak”, according to the BBA.
In addition, personal loans are at almost half of their peak in 2007-8.
“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,” said BBA statistics director David Dooks.
“January’s severe weather impacted adversely on what was already a subdued picture of borrowing demand from households and businesses,” he added.