BBA statistics director, David Dooks said:
“The on-going contraction in net lending to business masks the reality of finance available. Bank of England research shows that there is around £25billion of new lending to business quarter on quarter, but this is being more than offset by businesses paying down debt as part of their balance sheet management and cost containment.
“Demand for mortgages continues to be weak despite more properties reportedly coming on to the market. Even with stable or falling house prices the current economic climate makes it unlikely that demand will pick up in the near future.”
The annual growth in the banks’ net mortgage lending is 4.1%, substantially ahead of the 1.0% for the whole mortgage market in July. Subdued spending has led to reduced consumer demand for credit (particularly for personal loans) which contracted by 2.1% over the past year.
Personal deposits have risen 4.6% over the past year. Lending to non-financial companies has contracted by 5.7% over the past year with improvements in some sectors offset by reduced lending elsewhere.
Mortgage lending
Gross mortgage lending of £8.1bn in August was 7.6% lower than a year ago. High street banks continued to see fairly strong mortgage repayments, so that net mortgage lending increased by £2.5bn in August compared with £3.3bn for the same month in 2009.
Number of approvals
The average value of house purchase approvals (£143,500) fell again in August but was still some 3.8% higher than a year ago.
Numbers of approvals for remortgaging have been slightly stronger in the last two months while those for equity withdrawal have remained at similar levels to July and the previous six months average.
Unsecured lending annual growth rates
Numbers of card purchases fell back slightly in August to below the six-month average in line with weaker retail sales volumes. Repayment levels are holding up and more than matching new spending levels, so the stable growth in card borrowing, largely, reflects interest accruing.
Demand for personal loans continued to be weak in August with new lending some 12 % lower than a year ago.
Company borrowing annual growth rates
Some sectors were showing slower contraction rates in August but overall, growth rates for lending to non-financial companies remain weak. Reports suggest that the demand for bank credit continues to be subdued with larger businesses focusing on reducing debt and building up cash reserves.
Nick Hopkinson, Director at Property Portfolio Rescue, says:
“Today’s data from the major high street banks highlights that last month saw the lowest number of new mortgages offered this year. This is further confirmation, if needed, that the ‘mortgage famine’ is continuing to worsen.
"Even the taxpayer-owned banks are failing to help struggling borrowers who need massive deposits still and a perfect credit score to get any kind of reasonable loan currently.
“Worries over inflation and future interest rates continue to bubble away at the back of borrower’s minds and huge public cuts are very much on the agenda which will make life in ‘austerity Britain’ much tougher for many in the near future.
"Even estate agent surveys are showing asking price falls as reality slowly sinks in amongst even the most optimistic home sellers. Against this backdrop, house prices are going to fall further just as certainly as the autumn leaves will fall off the trees in the next couple of months.”
