While mortgage lending continued to remain strong, unsecured lending growth faced a downturn. Figures showed July’s gross mortgage lending was £19.1 billion, up 19 per cent on the same period last year. Net lending on loans and overdrafts rose by £0.7bn in July, compared with an increase of £0.2bn in June and an average rise over the previous six months of £0.4bn.
But the underlying net lending on credit cards fell by £0.3bn, repeating a fall in June and following an average monthly contraction of £0.1bn over the first half of the year. This compared to underlying net mortgage lending rising by £5.7bn, compared with £4.0bn in July 2005.
David Dooks, BBA director of statistics, said: “July is typically a slow Summer month for mortgage approvals, so the lower numbers and value of loans approved compared to June were anticipated. Allowing for this seasonality suggests that loans approved for house purchase and remortgaging remain on a constant trend, while demand for equity withdrawal has continued to weaken since the turn of the year.
“The drawdown of loans approved in previous months shows strong mortgage lending to have been approaching the peaks of 2004, ahead of the interest rate rise in early August. Meanwhile, unsecured lending is displaying quite a different trend, with the growth rate continuing to decline, largely reflecting the ongoing contraction in credit card borrowing.”
Colin Snowdon, chief executive of Freedom Lending, was unsurprised by the news. He commented: “I think it’s an inevitable trend. People are a lot savvier over whether to take up credit cards and I think housing will be used to finance things more. There are also divergent trends in lenders’ performance, with rising bad debt meaning losses on credit cards, while the small increase in mortgage bad debt is very measured and controlled.”
