Consumer credit weak

Latest figures from the Major British Banking Groups (MBBG), for June 2006, have shown that:

• Total sterling lending to the UK private sector showed a net underlying increase of £13.8bn (+1.1 per cent) to £1,228bn. This was higher than last month’s underlying rise of £12.6bn but lower than the average of £15.2bn over the previous six months.
• Net mortgage lending rose by an underlying £5.6bn. This was slightly lower than the £5.8bn rise in May but higher than the average of +£5.3bn over the previous six months. In the first half of 2006 mortgage lending was some 18 per cent stronger than in the equivalent period of 2005. Unsecured personal lending fell by £0.1bn in June, compared with an average rise of £0.3bn in the previous six months. Loans and overdrafts rose by £0.2bn, whilst underlying credit card borrowing fell by £0.2bn and has now declined in four of the last six months.
• Lending to real estate companies rose by £1.1bn and to hotels and restaurants by £0.3bn, while lending to wholesale and retail trade fell by £0.6bn, reversing the £0.7bn rise in May.
• Deposits from the private sector rose by a strong £14.5bn (+1.7 per cent) to £888bn. Personal deposits increased strongly by £4.4bn compared with average growth of £3.1bn in the previous six months.

David Dooks, BBA director of statistics, said:“Whilst mortgage lending continues to grow strongly, consumer credit is not nearly so robust. Net unsecured lending in 2006, so far, has risen by less than half the increase seen in the same period of last year. Borrowing on credit cards remains particularly subdued with this year seeing net repayments of £0.7bn compared with net lending of £1.1bn in the first half of 2005.”

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)

Total net lending rose by an underlying £5,541m in June, compared to £6,218m in May and £5,155m in June 2005. Of the total, mortgage lending accounted for £5,598m of the rise, compared to May’s rise of £5,822m. Consumer credit fell by £56m; personal loans and overdrafts rose by £189m compared with May’s rise of £669m, while credit card lending fell by an underlying £245m compared with a fall of £262m in May and a recent average fall of £47m.

Lending to financial firms

Lending to financial companies fell by £666m in June as borrowing by other financial intermediaries (+£1,891m) was partly offset by repayments from investment and unit trusts (-£1,376m) and securities dealers (-£1,065m).

Lending to non-financial firms

Lending increased to real estate companies by £1,119m to hotels and restaurants by £292mn and to transport, storage and communication by £154m. There were net repayments from wholesale & retail trade (-£647m) and construction (-£210m).