Mortgage lending increases but consumer credit weak

Amanda Jarvis

December 20, 2005

-Total sterling lending to the UK private sector showed a net underlying increase of £11.1bn (+1.0%) to £1,146bn. This was stronger than both the previous month’s underlying rise of £8.7bn and the average of +£8.8bn over the previous six months.

– Net mortgage lending in November rose by an underlying £5.1bn; the strongest rise since July 2004, much higher than both October’s rise of +£4.3bn and the average of +£4.4bn over the previous six months. Underlying growth in overall unsecured personal lending (+£0.3bn) was weaker than both October and the average of the previous six months. Of this, loans & overdrafts rose by just £0.1bn, well down on the recent average (£0.4bn), whilst credit card borrowing also rose by just £0.1bn.

– Although lending to real estate companies was the largest component of lending to non-financial companies, rising by £0.9bn, lending to hotels & restaurants (+£0.7bn), retail trade (+£0.3bn), other manufacturing (+£0.3bn) and construction (+£0.3bn) all showed relatively strong increases.

– Deposits from the private sector rose by £11.2bn (+1.4%) to £823bn. Of the total, personal deposits increased by £2.9bn compared with average growth of £2.2bn in the previous six months.

David Dooks, BBA director of statistics, said:
“November’s above-average rise in mortgage lending reflects the recent upturn in approvals and provides more evidence that the mortgage market bottomed out in the summer and is now being underpinned by steady demand.

Ahead of the festive season, the picture of consumer spending and credit is mixed. The pick-up in retail sales is not yet being matched by stronger borrowing on credit cards or higher demand for personal loans.

The banks saw stronger underlying demand in November from companies, particularly in the property, hotels and retail sectors, though some of this is expected to be short-term finance.”

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