The banks’ net mortgage lending grew by 0.8% in the year to July. The outstanding level of unsecured borrowing from the banks has contracted by 2.9% over the year to July. Within that, credit card lending rose by 3.6%, so it is a contraction of 7.3% in other loans and advances which drives the overall decline. Cash ISA inflows continue to be strong this year as households have looked to accounts paying better rates of interest, leading to a rise in all personal deposits of 5.4% over the year to July.
Gross mortgage lending of £7.1bn in July was below the recent monthly average and reflected continued low levels of activity in the housing market. Historically, the difference between gross lending and capital repayment produced significant net lending each month. However, with declining levels of gross lending and a high capital repayments resulting from low interest rates, net lending has reduced to comparatively low levels.
Mortgage approvals for house purchase in July were 17% lower than a year ago, though there was an upturn in demand from June.
The average house purchase approval stands at £161,100 but due to expanded reporting within one banking group since the turn of the year, this cannot be directly compared with earlier trend figures. Numbers of remortgaging approvals were some 41% lower than in July 2011 and approvals for other secured lending were 25% lower.
New spending on credit cards of £6.9bn was below the recent monthly average and continues to be more than offset by repayments. Consumer demand for high street bank loans and overdrafts remains weak and the repayment of unsecured personal loans continues to outweigh new lending. Individuals’ outstanding loan amounts are now almost half of what they were at their peak in late 2007/ early 2008.
BBA statistics director, David Dooks said:
"We continue to see the household sector increasing deposits and repaying debt. High street bank ISAs continue to attract strong personal deposits while repayments of both mortgages and unsecured lending have grown strongly this year as households seek to reduce borrowing and borrowing costs.
“Companies are reluctant to borrow or invest new funds while domestic and international trading activities remain subdued or uncertain. With larger firms also using alternative funding from corporate bonds, bank borrowing levels are contracting."
Nick Hopkinson, Director of PPR Estates, said:
“Bank lending for mortgages remains effectively closed to everyone who really needs it. Huge deposits and perfect credit histories remain essential ingredients for anyone brave enough to be buying a house with a mortgage at the moment. Also, the announcement that one of the biggest high-street lenders is increasing its mortgage costs to existing borrowers will be a further blow to many struggling home owners. This is an ominous sign, indicating that real borrowing costs have disconnected from the Bank of England base rate and are moving towards 5%-plus in the near future for most mortgages. House prices face an uncertain autumn and are very likely to fall further rather than stay still based on the prevailing economic winds.”
