Figures Offer Contrasting Pictures On Mortgage Lending

The Council of Mortgage Lenders (CML), British Bankers' Association (BBA) and the Building Societies Association (BSA) have all released their latest lending information today, with the CML suggesting consumer attitudes to loans are very different to those noted by the BBA and BSA.

According to the BSA, lending in June was impacted by higher interest rates following the decision by the Bank of England's monetary policy committee (MPC) to raise the base rate of interest a number of times this year. Both January and May saw 0.25 per cent rises in the interest rate, something that added to the continuation of sluggish summer lending.

"The slow start to the summer has continued", said Brian Morris, head of savings policy at the BSA. "Typically, building societies are maintaining robust lending criteria and this is a possible explanation of the recent slowdown in building society lending".

Year-on-year this "slowdown" was seen in a fall in gross advances, net advances and approvals, all related to consumers seeking home loans for the purchase of a new property during June 2007. Following July's interest rate increase and speculation about a further rise in the near future, according to Mr Morris, "lending may well cool further over the remainder of the year and into 2008".

This concept of reduced lending in the form of home loans or other forms of credit was something also witnessed by the BBA in June, with the association claiming that although mortgage lending and lending to the private sector as a whole increased during June, it was below the trend that could have been expected following what the BBA called a "strong rise" in mortgage lending in May. "The contrast between May's strong rise in mortgage lending and a much weaker figure in June makes it difficult to gauge the current impact of higher interest rates on mortgage demand but we've seen the trend gradually slowing since the turn of the year", BBA director of statistics David Dooks said.

Borrowing through methods other than secured loans, such as via credit cards, loans and overdrafts, was found to be "relatively flat", according to Mr Dooks, with the BBA recording a 0.1 billion pounds fall in credit card borrowing and a 0.1 billion pounds rise in loans and overdraft use. The BBA saw mortgage lending rise by an underlying 5.1 billion in June, below the monthly average of 5.3 billion.

However, figures from the CML seem to offer a contrast to those from the two associations above. In June, the organisation saw mortgage lending reach a "new record" of 34.2 billion pounds, a nine per cent rise on May's figures for home loans. Despite this, it was a lower percentage increase than noted in previous Junes, the CML notes, voicing a warning about any future interest rate rises.

"While the markets still expect one more interest rate rise before the end of the year, we believe the monetary policy committee should carefully assess the impact of past rises on inflationary pressures before it takes further action. In the meantime, borrowers should be thinking seriously about how they will afford higher mortgage payments if they come out of a fixed-rate deal this year", said CML director general Michael Coogan.

Last month, figures from Moneyextra suggested that remortgaging was growing in popularity in the UK, with a 7.19 per cent rise in the borrowing method noted year-on-year.

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