Mortgage lending hits six month high
Mortgage lending bounced back during August after being negative for the first time on record during July, figures showed today.
Net lending, which strips out redemptions and repayments, reached £1.01 billion during the month, the highest level since February, according to the Bank of England.
The rise comes after homeowners repaid £203 million more than was advanced during July, the first time lending has been negative since the Bank of England began collecting data in its current format in 1993.
But lending through unsecured credit, such as credit cards, loans and overdrafts, was negative for the second month running and only the fourth time on record, as consumers continued to focus on paying down their debt.
People repaid a record £309 million more than they borrowed through unsecured debt during August.
Within this total, outstanding credit card debt rose by £196 million, but money owed on loans and overdrafts fell by £506 million.
The number of mortgages approved for house purchase remained broadly unchanged at 52,317, suggesting the recent improvement in the housing market will continue.
But there was a further fall in the number of people remortgaging, with the number of homeowners switching to a better deal dropping by 14 per cent compared with July to 29,059.
Separate figures issued by the Building Societies Association showed net lending by the mutual sector was negative for the eighth month in a row, with consumers repaying £655 million more than they borrowed.
Some of the reduction in lending is likely to be down to the fact that Britannia is no longer classed as a building society following its merger with The Co-operative Financial Services at the beginning of August.
Adrian Coles, director-general of the BSA, said: "Despite signs of a modest improvement in market conditions in recent months, activity will not return to normal levels until funds for mortgage lending are more widely available to building societies and other lenders."
People also withdrew more than they saved from building society accounts for the sixth month in a row, with the level of deposits held by the sector falling by £473 million, although this was well down on falls of £2.26 billion and £1.36 billion seen in June and July respectively.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "The Bank of England data indicate that mortgage activity is currently stabilising at a level significantly above its November 2008 record low levels, but still well down on long-term norms.
"While housing market activity has been lifted by the still significant fall in house prices from their 2007 peak levels and low mortgage interest rates, the upside continues to be limited by unfavourable economic fundamentals and tight credit conditions.
"Consequently, while house prices increased for the sixth successive month in August according to the Nationwide and could well rise further in the near term, we suspect that they will be prone to relapses over the coming months."
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