Mortgage repayments outstripped lending for the first time last month as Britain’s households became more cautious, say banks.
Net mortgage lending declined by £78m – the first reversal in the 16 years that records have been compiled by the British Bankers’ Association.
The organisation said that households are focusing on paying down their debts, meaning their total level of debt has not been changing much.
The number of mortgage approvals for house purchase also slumped to its lowest level in 13 months, which provided further evidence that it is getting tougher for people to take out a mortgage. There were 30,238 such approvals in May worth £4.9bn.
Lenders have been tightening their borrowing criteria amid the weak economy, as well as putting up their rates for both new borrowers and more than a million existing ones.
There are hopes that a “funding for lending” scheme announced by the Bank of England and the Treasury earlier this month could help kick-start lending.
Analysts have said this may put the brakes on recent rate increases although those currently unable to get a mortgage may see little improvement.
There were also 18,678 loans approved for re-mortgaging, worth £2.6bn in May, the lowest number of loans since February. Lenders and estate agents have also reported a dip in activity following the end of a two-year stamp duty concession for first-time buyers.