Mortgage lending begins 2007 in robust shape

Gross lending hit an all-time January high of £26.8 billion according to the latest data from the Council of Mortgage Lenders.

Although this was down by 6% on the £28.5 billion lent in December, it is up by 16% on January 2006 (£23 billion).

Commenting on today's data, CML director general Michael Coogan said: "Mortgage lending kicked-off 2007 in robust shape, and we expect this strength to continue over the next few months. Quite how strong it will be later in the year depends on what happens to interest rates. While we avoided a rate rise earlier this month, the markets are still expecting at least one more quarter point rise by the middle of the year. And, because of this uncertainty, it would be surprising if some home buyers did not review the timing of their decision to move" .

Latest figures from the Major British Banking Groups, for January 2007, show that:

Total sterling lending to the UK private sector showed a net underlying increase of £21.9bn (+1.7%) to £1,290bn. This was the strongest monthly rise in lending for nine months and compares with an underlying rise of £5.3bn in December and an average of £11.8bn over the previous six months.

Net mortgage lending rose by an underlying £5.6bn. This was very similar to the increase of £5.7bn last month and to the monthly average over the previous six months.

Unsecured personal lending was unchanged in January, compared with a rise of £0.1bn in the recent monthly average. Loans & overdrafts rose by £0.5bn, whilst credit card borrowing fell by £0.5bn.

Lending increased to real estate companies (+£0.2bn), though there were decreases in lending to manufacturers (-£0.3bn), wholesale & retail trade (-£0.2bn) and construction (-£0.1bn).

Deposits from the private sector rose by £6.1bn (+0.7%) to £937bn. Personal deposits increased by £1.7bn, much lower than the average growth of £3.0bn over the previous six months.

People are still borrowing money to buy homes, said incoming chief executive of the British Bankers' Association (BBA), Angela Knight today.

Ms Knight said the continuing fall in credit card borrowing is an encouraging sign that people are managing their finances better.

David Dooks, BBA director of statistics, said: “We can see that the January sales did not encourage borrowing on credit cards. As in the second half of last year, card borrowing is contracting and, with weaker retail sales being reported, this reflects the consumer’s current attitude to spending and their commitments.

Mortgage lending continued to be buoyant, as we expected following the high volumes of approvals in the final quarter of last year.”