Figures from the Major British Banking Groups showed net mortgage lending rose by £66.8 billion in 2006 – 20 per cent more than in 2005. Lower growth in net lending was recorded in December 2006, rising by an underlying £5.8 billion compared to the record increase of £6.7 billion in November. However, this was in line with the monthly average over the previous six months.
The BBA admitted that the findings were in contrast to continued weak consumer credit. Loans and overdrafts increased by £4.2 billion, 15 per cent less than in 2005, while credit card lending contracted in 2006, falling by £1.8 billion compared to an increase of £1.6 billion in 2005.
David Dooks, BBA director of statistics, said: “Mortgage demand remained robust, despite the housing market experiencing 7 per cent annual price inflation and an expectation of rising interest rates throughout the second half of the year. The appetite for consumer credit has clearly waned, as reflected by the significant contraction in credit card borrowing.”
Darren Pescod, managing director of The Mortgage Broker, commented he did not believe the upward swing in mortgage lending was sustainable and added: “We have seen plenty of debt consolidation in the market, so this is one of the possible reasons for the fall in unsecured debt. It’s cheaper for applicants to fund debt on the equity of their property than get an unsecured loan.”
