March figures for high street banks shows mortgage demand may be weakening due to rising interest rates, according to the British Bankers’ Association.

March’s gross mortgage lending was £18.6bn, which is 5% more than March 2006 but only 198,000 mortgages were approved in March; a decrease of 8% when compared with the previous year. The average loan approved for house purchases was £150,800, which is 12% higher than a year earlier. Also, underlying net mortgage lending rose by £5.1bn, similar to February’s increase, but less than the recent average of £5.5bn. The annual growth in net mortgage lending continued to stay around 14%.

In addition, BBA figures show that credit card borrowing fell by £0.1bn in the month, while borrowing on personal loans and overdrafts were largely unchanged.

David Dooks, BBA’s director of statistics, said: “Strong levels of gross mortgage lending reflect homebuyers and homeowners seeking out fixed rate mortgages as protection against rising interest rates. However, in the last two months net lending has risen less sharply and, compared to the same time last year, the number of mortgages approved in March was lower, indicating that weaker demand is starting to emerge.

“As people continue to reduce their commitments, weaker spending on credit cards and lower new loan borrowing led to an overall fall in personal borrowing”, he concluded.