Mortgage lending in November holds up

While mortgage lending continued to hold-up in November unsecured loans to consumers dropped further while personal deposits increased by less than in recent months, according to the British Bankers Association (BBA).

Loans to the corporate sector declined overall in November, though those to non-financial companies ticked up slightly.

BBA statistics director, David Dooks, said of the latest data: “Household priorities are showing up in the November figures. Demand for new personal loans was weak and people are paying off debt or building savings in response to economic circumstances.

“In the housing sector, prices have continued to edge up and approvals for house purchase are now back at a similar level to that of two years ago. Re-mortgaging activity continues to run at a low level as borrowers revert to low standard variable rates or trackers from maturing fixed rate loans.

“Lending to non-financial companies ticked up slightly in November, having declined in each of theprevious two months.”

Gross mortgage lending in November, though some 12% lower than a year ago was slightly higher than last month.

In the absence of remortgaging activity, gross lending is unlikely to grow from its current level.

The banks’ annual growth rate of 4.7% in mortgage lending substantially exceeds growth of just 0.8% for October across the market as a whole.

Comparisons with the low point of a year earlier reflect the weakness of the market then, rather than indicating a much stronger market now but the number of house purchase approvals has risen gradually throughout most of 2009 and is now slightly higher than two years ago.

Remortgaging approvals are twothirds lower than two years ago.

Numbers of approvals for equity withdrawal are about half of the level seen in 2007.

New spending and repayments on credit cards were both down on last year and the annual growth in lending balances at nearly 7.5% has weakened in the last few months.

Demand for personal loans was particularly weak and balances have fallen by £3.6bn over the year to date.

Total consumer credit has contracted by 2.2% over the last year.

So far this year personal deposits have increased by over £18bn compared with £21bn in the same period of 2008, though growth in deposits dipped slightly in November.

Lending to non-financial companies overall increased slightly in November, though in the six months to October, lending to all non-financial companies contracted on average by £1.4bn a month. The main areas of growth were in real estate & business services and in transport, storage & communications.

Lending to financial companies fell in November, more than reversing October’s rise and on average over the previous six months, lending has risen by £2.1bn a month.