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Demand for mortgages continues to be weak

Personal deposits have risen 4.6% over the past year.

Lending to non-financial companies has contracted by 5.7% over the past year with improvements in some sectors offset by reduced lending elsewhere.

Gross mortgage lending of £8.1bn in August was 7.6% lower than a year ago. High street banks continued to see fairly
strong mortgage repayments, so that net mortgage lending increased by £2.5bn in August compared with £3.3bn for the
same month in 2009

August house purchase approvals were weaker than recent months reflecting low demand. The average value of house purchase approvals (£143,500) fell again in August but was still some 3.8% higher than a year ago.

Numbers of approvals for remortgaging have been slightly stronger in the last two months while those for equity withdrawal
have remained at similar levels to July and the previous six months average.

Numbers of card purchases fell back slightly in August to below the six-month average in line with weaker retail sales
volumes. Repayment levels are holding up and more than matching new spending levels, so the stable growth in card borrowing, largely, reflects interest accruing. Demand for personal loans continued to be weak in August with new lending some 12 % lower than a year ago.

Some sectors were showing slower contraction rates in August but overall, growth rates for lending to non-financial companies remain weak. Reports suggest that the demand for bank credit continues to be subdued with larger businesses focusing on reducing debt and building up cash reserves.

BBA statistics director, David Dooks said:

“The on-going contraction in net lending to business masks the reality of finance available. Bank of England research shows that there is around £25billion of new lending to business quarter on quarter, but this is being more than offset by businesses paying down debt as part of their balance sheet management and cost containment.

“Demand for mortgages continues to be weak despite more properties reportedly coming on to the market. Even with stable or falling house prices the current economic climate makes it unlikely that demand will pick up in the near future.”

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