Official data for May showed the lowest flow of total net mortgage lending since the monthly series began in April 1993, but the major UK lenders reported that in June their flow of net mortgage lending rose a little. The major UK lenders reported a further rise in approvals for house purchase in June, suggesting that mortgage lending for house purchase may continue to strengthen in coming months. Fixed mortgage rates rose in June, in part reflecting increases in swap rates. Some major UK lenders have reported that signs of stabilisation in housing market activity and prices, and the margins prevailing on higher LTV products, have slightly increased their appetite to lend at higher LTVs.
The flow of net lending to UK businesses remained negative in May. Some UK businesses repaid bank debt using funds raised on the capital markets. But, taken together, funds raised by businesses from banks and capital markets remained weak. Spreads and fees are reported to have risen in recent months, which the major UK lenders have attributed to higher longer-term funding costs and credit risk, though some of them thought that spreads may now be close to reaching a plateau. And, for some major UK lenders, a stabilisation in the economic outlook, as well as slightly more plentiful and cheaper funding, was expected to help them make credit more available over the next three months. Lenders reported little actual or expected increase in demand for credit, except for balance sheet restructuring.
Net flows of consumer credit remained weak in May. Within the total, net consumer credit excluding credit cards remained subdued, but was positive for the first time since December 2008. Spreads on credit card lending have continued to rise, reflecting higher actual and expected default rates. None of the major UK lenders reported any plans to expand the availability of consumer credit, and they had yet to detect any significant signs of an increase in demand.
