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Bank mortgage lending subdued last month

Mortgage lending by Britain's biggest banks was flat last month, figures showed today, as demand for borrowing remained subdued amid a sluggish economy.

Gross mortgage lending remained at £7.6 billion last month, equal to the previous month's lending, according to the British Bankers' Association (BBA), after an 11% plunge between May and June.

Elsewhere, the number of mortgage approvals was up 4% month on month at 74,950, while remortgages increased 7% to 26,043.

David Dooks, BBA statistics director, said: "Demand for borrowing from both households and companies continues to be weak, reflecting slow growth in the economy."

Net mortgage lending - gross lending minus repayments - was up in the period by 1.7% at £900 million, while unsecured credit, such as loans and credit cards, contracted by 1.1% to £100 million.

Retail sales continue to grow slowly - edging ahead 0.2% in July - so consequent demand from consumers for unsecured borrowing remains weak, the BBA said.

Companies repaid loans more than they borrowed in July, leaving net lending of minus £8.6 billion. This compares to a surplus of £6.8 billion in June.

The biggest decline in net lending came from financial companies, possibly due to half-year accounting reasons, while non-financial net lending was flat.

Brian Murphy, head of lending at independent mortgage broker Mortgage Advice Bureau, said the July figures reflect mortgage applications made before the summer holiday period when, historically, mortgage lending drops off.

He said: "A stronger indicator as to the health of the mortgage market will be mortgage applications made in September and October.

"In a healthy market we would expect to see an uplift in numbers post-summer vacations, but whether this will happen is anybody's guess.

"The problem doesn't lie with the lending environment, which is highly attractive at the moment. The problem lies with consumers feeling the financial pinch."