The outstanding level of unsecured borrowing contracted by 1.6% over the year to December. Within that, credit card lending rose by 5.7% but personal loans and overdrafts saw a contraction of 7.0%. Gross mortgage lending of £8.5bn in December was £1.1bn above the recent monthly average.
Historically, the difference between gross lending and capital repayment produced positive net lending data each month. With lower levels of gross lending and high capital repayments being maintained in the light of low interest rates, net lending gradually reduced to a flat balance through much of 2012. Higher gross lending in Q4 has generated a tickup in net lending.
BBA statistics director, David Dooks, said:
"2012 was a year of holding on to deposits and repaying debt for companies and households. New mortgage lending of £92bn was offset by £91bn of repayments and slow economic growth also continued to suppress new borrowing demand from consumers and from companies, where bond issuance was preferred to bank finance.
"Credit availability increased and pricing reduced towards the year-end as banks developed product offerings using the Funding for Lending Scheme, which is expected to bring further benefits to households and businesses in 2013."
Paul Hunt, managing director of Phoebus Software said:
“While the mortgage market may not be in peak physical condition, its fitness has been improving following a summer of low lending. Lenders are cutting rates and making more money available to a wider range of borrowers. The revival in lending to first time buyers towards the end of 2012 was particularly marked. The Funding for Lending seems to be working – to a degree – and this has led to a jump in activity. The FLS will inject more energy into the lending market over the course of 2013. But this is a 10,000 metres race, not a sprint. The industry’s performing well but it’s going to be more Mo Farah, less Usain Bolt.”
Mark Blackwell, managing director of xit2, property data specialists, comments:
“Funding for Lending may prove helpful – but flooding the largest lenders with potentially cheaper credit is only solving part of the problem. 2012 was essentially flat in terms of lending volumes. And while the market gradually improves we’ll keep seeing a lag before approvals grow. Mortgage lenders are facing a tentative recovery and less natural growth. In order to operate profitably in a tighter credit environment, lenders will have to optimise how they work rather than throwing resources at expansion. Tackling key threats like third party fraud would be a good start and data efficiency will be a big part of that. 2013 will only see more creeping progress, even with the effects of FLS.”
Nick Hopkinson, Director of property company, PPR Estates, commented:
“Today’s final report from the high-street banks signs off on a terribly depressing year for lending with home owners and businesses alike suffering reduced finance availability. Net lending growth in all major categories was down on 2011 for the major banks. Looking at new mortgage lending, even with the much heralded Funding for Lending Scheme in-place, approvals were still down in December on this time last year. In fact, the high-street banks are currently approving circa less than 27% of the loan numbers for house purchase they were before the credit crunch. It’s clear the banks have a long way to go before they are really open for business and are still struggling will billions of pounds of bad debts in the background. It’s also distressing to see they are simply squeezing savers now they are getting cheap money from the Government – this tells us all we need to know about their collective moral consciences, once again.”
