Mortgage demand holding up, consumer credit subdued

July’s gross mortgage lending of £21.3bn was 12% higher than last year, according to figures from the British Bankers’ Association (BBA). With annual house price inflation below this rate, the stronger figure reflects higher levels of re-mortgaging activity in the month.

Underlying net mortgage lending (gross lending minus repayments and redemptions) rose by £5.7bn. Although this was higher than June’s increase and the recent average (both £5.4bn), annual growth remained at around 14%.

There were 182,950 mortgages approved (for all purposes) in July with an aggregate value of £21.5bn. The average loan approved for house purchase was £156,900, some 13% higher than a year earlier.

Credit card borrowing fell by £0.1bn (net) in the month, while borrowing on personal loans and overdrafts rose by £0.2bn.

David Dooks, BBA director of statistics, said: “With customers seeking to replace deals or fix their mortgage costs, increased remortgaging activity boosted the banks’ lending in July. Lower approvals volumes simply reflected the seasonal pattern, so we expect the stable trend in the banks’ lending to continue over the next couple of months.

Spending on credit cards was 8% higher than in July last year, but because cardholders are at least matching their spending with repayments, card borrowing continued to decline.”

Mortgage Lending

When compared to July 2006, house purchase approvals were down 1% by number but up 12% by value; remortgaging approvals were up 12% by number and up 26% by value; while approvals for equity withdrawal were down 2% by number and up 10% by value.

Consumer Credit

Spending on credit cards totalled £7,663mn in July 8% more than in July 2006. After allowing for repayments and seasonal adjustment, underlying net lending decreased by £82mn.

New lending on personal loans and overdrafts in July was 2% lower than in July 2006 and after seasonal adjustment, loan and overdraft lending rose by £223mn net.