The British Bankers’ Association has reported that mortgage lending remains subdued, and the decline in mortgage lending approvals continued in September. Concerns over the budget and government cutbacks is said to be having a serious effect on mortgage and other forms of lending, with many households being cautious in the current climate and shunning new borrowing.

The BBA said that based on the figures for September, and given the low level of consumer confidence stemming from the budget and spending cuts, activity in  the housing market was likely to remain subdued in the months to come, and in addition to mortgage lending being affected there was little appetite for other types of finances at present including personal loans.

With the low demand for borrowing continuing the number of new mortgages approved for September fell from the previous month to 31,104. The BBA said that this was below average compared to the last six months. The BBA said that the low appetite for borrowing was also being seen with other forms of finance such as unsecured lending, with many too cautious to lumber themselves with more debt in the current climate.

The Spending Review that was announced by the chancellor George Osborne recently is likely to hit consumer confidence hard, as it will increase fears about job losses amongst other things. This will further hit consumers’ appetite for borrowing, and could see figures slide even further.

BBA statistics director David Dooks said: “Subdued mortgage activity and little demand for unsecured credit are a reflection of household uncertainties ahead of the Spending Review. Demand for new mortgages remains low despite more properties on the market and falling house prices.”