Banks report small appetite for borrowing

Julian Harris
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LENDING to companies, consumers and house-buyers remained muted in June despite a pick-up in the number of mortgage approvals, the British Bankers’ Association (BBA) announced yesterday.

Net unsecured lending to consumers continued its steady decline, down by £100m in the month – matching the six month average and the fall recorded in May.

Lending to non-financial companies was also down at the same rate as the previous month, slipping by £2.5bn – significantly higher than the six month average of the £1.4bn drop.

The BBA’s statistics director David Dooks said: “Businesses, as has been seen elsewhere, are concerned about the economic outlook and, in weathering difficult trading conditions, they are putting off expansion or investment plans and limiting borrowing.”

The number of mortgage approvals for house purchase jumped three per cent to 31,747 in the month – an 11 month high. Yet net mortgage lending actually dipped to £500m, from £1.1bn in May. “Mortgage approvals were still very low by long-term norms,” added Howard Archer of IHS Global Insight.

“Approvals were still down 6.2 per cent year-on-year from 33,846 in June 2010. Indeed, June’s number of mortgage approvals was only 55 per cent of the average monthly level of 57,333 seen since 1997.”

Capped mortgages have surged in the last two years, according to separate research from the website Moneyfacts. Capped deals – which work like variables rate mortgages but with a ceiling on how high interest levels can go – reflect “borrowers becoming twitchy about when rates will start to rise”, Moneyfacts commented.

While there was only one capped mortgage on the market two years ago, there are now 39 being offered to house buyers and owners.

The Bank of England releases official lending figures for June on Friday. “We expect the number of mortgage approvals to have increased to 47,300 (from 45,900 in May), net secured lending of £0.8bn (£1.1bn in May) and net consumer lending of £0.1bn (£0.2bn in May),” said Barclays Capital in a note.