Bank lending to individuals stays weak

MORTGAGE lending dropped to a five-month low in July with just 33,700 home loans approved, taking the annual percentage decline to 18.5 per cent, the British Bankers’ Association (BBA) said yesterday.

Tighter lending conditions combined with subdued demand for home loans pushed mortgage approvals down last month. This is despite recent calls for the banks, which received taxpayer support, to increase lending.

This is less than June’s figure of 34,600 and well below the historic average, which is around 59,000. Net mortgage lending in July was unchanged at £2bn ?– this is just half the £4.1bn level it has averaged since 2000.

However, the BBA pointed out that the annual growth in the banks’ net mortgage lending is 4.1 per cent, substantially ahead of the 0.9 per cent for the whole mortgage market in June.

BBA statistics director, David Dooks said: “Gross mortgage lending remains stable, although demand for mortgages continues to be subdued. The greater availability of properties for sale and slowing house price growth have not yet fed through to increased house purchase approvals.”

The BBA added: “Although the abolition of home information packs (HIPs) has reportedly led to more houses being on the market so far there has not been any obvious impact on the number of house purchase approvals, which declined slightly in July.”

Subdued spending has led to reduced consumer demand for credit (particularly for personal loans) which contracted by 2.2 per cent over the year. Repayment levels are stable and more than matching new spending levels, suggesting that the growth in card borrowing reflects interest accruing. Dooks added: “Consumer credit outstanding continues to reflect high repayments together with pressure on household finances and job uncertainty while companies are tending to retrench and reduce their bank borrowing.”

Earlier this month, the Bank of England remarked that credit conditions “seemed set to remain somewhat tighter for longer”.