Lower growth in net mortgage lending and continued weak consumer credit

Total sterling lending to the UK private sector showed a net underlying increase of £4.0bn (+0.3%) to £1,266bn, according to latest figures from the Major British Banking Groups, for December 2006. This was the weakest monthly rise in lending for over a year and compares with an underlying rise of £15.2bn in November and an average of £12.4bn over the previous six months.

Net mortgage lending rose by an underlying £5.8bn. This was lower than the record increase of £6.7bn last month but in line with the monthly average over the previous six months. Unsecured personal lending rose by £0.1bn in December, in line with the recent monthly average. Loans & overdrafts rose by £0.4bn, whilst credit card borrowing fell by £0.3bn.

Over 2006 as a whole, net mortgage lending rose by £66.8bn, 20% more than in 2005, loans & overdrafts increased by £4.2bn, 15% less than in 2005, while credit card lending contracted in 2006 (falling by £1.8bn) compared to an increase of £1.6bn in 2005.

Deposits from the private sector rose by £13.3bn (+1.4%) to £944bn. Personal deposits increased by £4.0bn, exceeding the average growth of £3.3bn over the previous six months.

David Dooks, BBA director of statistics, said: “2006 was notable for contrasting trends in secured and unsecured personal lending. Whilst mortgage demand remained robust, despite the housing market experiencing 7% annual price inflation and an expectation of rising interest rates throughout the second half of the year, the appetite for consumer credit clearly waned, as reflected by the significant contraction in credit card borrowing.”