Net mortgage lending up in December

In December, net mortgage lending rose by £2.9 billion, according to figures from the British Bankers’ Association (BBA). This was lower than in November and below the average of the previous six months. Consumer credit remained subdued, falling by £0.4bn net, while personal deposits rose by £4.0bn. However, the significant falls in Bank Rate and the financial sector turmoil affected both lender and customer activity in November and December, so monthly movements are less indicative than usual of trends.

BBA statistics director, David Dooks, said of the latest data: “This first opportunity to compare 2008 with 2007 shows that gross mortgage lending by the main high street banks totalled £170bn, some 23% below 2007’s total of £221bn. However, lending by the rest of the mortgage market was half the previous year’s total, showing how mortgage lending became much more concentrated during the year. The banks approved less than half the 2007 number of loans for house purchase, reflecting falling demand from households facing greater economic uncertainty and double-digit falls in house prices over the year which led to a wait-and-see mentality.

“Consumer credit was very weak in December as people reined in their credit card spending, despite early Sales and heavy discounting by retailers. This consumer caution was also reflected in personal deposits, which rose strongly.”

The annual growth rate for net mortgage lending was still in double digits at end-year and reflects the main banks replacing other lenders in the market. During 2008, banks’ net lending rose by £48bn, compared with £62bn in 2007.In 2008 as a whole, gross lending was £170bn, some 23% lower than in 2007.

Approval activity appeared to increase slightly during December, but was more likely to reflect delayed activity from November.

In 2008, house purchase approvals were 52% lower than in 2007.

Approvals for re-mortgaging were 14% lower than 2007.

Approvals for equity withdrawal & other purposes were 33% lower in 2008 than 2007.

Credit card borrowing declined in December and the annual growth rate fell from 7.9% to 7.0%. The number of purchases was 5.9% below those seen a year ago.

Though borrowing on overdraft increased slightly in December, personal loans declined further and there was a net fall in non-credit card lending. The annual growth rate declined from 1.5% to 0.7%.

Personal deposits in December rose by much the same as in November, taking the annual growth rate from 4.2% to 4.7%.

The growth in lending to the real estate sector was very subdued in December and there were net repayments of lending to, manufacturers, wholesalers & retailers and transport; all sectors heavily influenced by the impacts of the economic downturn while the reduction in lending to the renting machinery & equipment sector reflected the repayment of short-term finance. Lending to financial companies fell as temporary funding transactions in previous months unwound.