Research shows steady underlying growth in mortgages

Amanda Jarvis

October 20, 2004

* Total sterling lending to the UK private sector showed an underlying net increase of £12.4bn (+1.2%) to £1,048.5bn. This was weaker than August’s rise of £14.2bn but stronger than the average rise for the previous six months of £11.8bn.

* Mortgage lending rose by £5.4bn. Though this was some £1.0bn stronger than the previous month, the increase largely reflected intra-company accounting within one group, rather than a fundamental change in demand. Growth in total unsecured personal lending (+£0.8bn) was slightly below the recent average (+£1.0bn), with credit card borrowing (+£0.3bn) in particular showing the weakest monthly growth of the year.

* Lending to most categories of non-financial companies increased again in September. Lending to real estate (+£2.0bn) was the strongest figure for some years. Lending to transport, storage and communication increased for the fifth consecutive month (+£0.4bn) and there was strong lending to unclassified industrial categories (+£1.9bn).

* Overall lending to financial companies decreased by £0.5bn with strong lending to investment and unit trusts (+£3.9bn) being offset by an underlying decline in lending to other financial intermediaries (-£2.5bn) and securities dealers (-£1.4bn).

* Deposits from the private sector rose by £7.1bn to £721.9bn. Of the total increase, personal deposits accounted for £2.6bn, well above the recent monthly average (+£1.8bn).

David Dooks, BBA director of statistics, said:
“Though September’s mortgage lending was stronger than in August, this was explained by a reporting technicality that, when allowed for, does not suggest any increase in underlying demand. The more detailed mortgage lending data available next week will show whether the recent downward trend in approvals and gross lending has continued.

After several months of stronger borrowing on credit cards, September saw below average growth, within a weaker overall figure for consumer credit.”

Analysis of MBBG sterling lending to UK public and private sectors

Lending to individuals (after allowing for the effects of securitisations, loans acquired from special purpose vehicles, transfers, acquisitions, etc – see note 4 below)

Net lending rose by £6,243mn in September, compared to £5,573mn in August and £6,588mn in September 2003. Mortgage lending accounted for £5,388mn of the rise, compared to August’s £4,390mn. Within consumer credit, September saw an increase in loans and overdrafts of £551mn compared to August’s figure of +£622mn, while the rise in credit card borrowing (+£286mn) was well below the recent average (+£480mn).

Lending to financial firms

Lending to financial companies decreased by £535mn, with increases in lending to investment and unit trusts (+£3,869mn) being offset by an underlying decline in lending to other financial intermediaries (-£2,513mn) and securities dealers (-£1,431mn)

Lending to non-financial firms

Lending to real estate companies (+£1,981mn) increased strongly to the highest figure for some time and there were increases in lending to most other sectors. In particular, lending to transport, storage & communication rose by £432mn, construction (+£258mn) hotels and restaurants (+£147mn) and food, beverages and tobacco (+£128mn).

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