Lending slows as consumers pay back more

BANK lending continued to slow in December, but remains up on 2010’s figures according to data published yesterday by the British Bankers’ Association (BBA).

New mortgage lending hit £8.7bn in the month, 12 per cent higher than in December of 2010 and the strongest month of 2011.

However, annual net growth in the sector slowed to just 1.5 per cent – its lowest rate in the decade of available figures – largely thanks to rising repayments.

Consumer credit shrank by 1.4 per cent in 2011. After a £0.2bn fall in November, net lending held steady in December – in part, analysts believe, because of increased spending in the run up to Christmas.

“Consumer appetite for taking on new borrowing is very low while there is also a strong desire of many consumers to reduce their debt,” said economist Howard Archer from IHS Global Insight.

“Consumers’ desire to get a tight grip on their finances is clearly the consequence of current heightened concerns over the outlook for the economy and jobs.”

Lending to non-financial businesses fell £2.3bn in the month, after a £0.4bn rise in November. The BBA blamed weak demand for credit.

Meanwhile financial businesses cut total debt by £3bn in the month, slowing from a £12.7bn decline in the previous month.