The British Bankers' Association reported that new mortgage lending by its members continued to decline, falling to pounds 428m last month, from pounds 508m. The Building Societies' Association reported a rebound in its net advances to pounds 906m from a low level of pounds 671m in April. Although this was 9 per cent higher than a year earlier, it mainly reflected the societies' gains in market share at the expense of the banks.
Peter Williams, head of research at the BSA, said: ``With the current weakness of consumer confidence, it is unlikely that the upturn in May's figures signals the beginnings of a strong recovery in the market.''
There was other evidence supporting his subdued diagnosis. The number of new loans and new commitments to lend made by the building societies were both virtually unchanged compared with May 1994, at 49,000 and 55,000 respectively.
Inland Revenue statistics showed that the total number of house sales in May was 98,000 - down 2,000 during the month and the lowest since early 1993. This follows a survey from the Royal Institute of Chartered Surveyors published earlier this week showing a sharp dip in both activity and prices last month. The RICS said gloomy predictions about the future of the housing market were in danger of becoming self-fulfilling.
Other consumer borrowing was, by contrast, very buoyant. The big banks lent pounds 313m in May, the same as April and their highest personal lending since December 1990. As this surge has not coincided with a big rise in spending, Michael Saunders, a Salomon Brothers economist, suggested people were taking advantage of cheap retail credit deals.
The British Bankers' Association reported that loans to the financial sector rose to pounds 1.4bn in May. Of this pounds 884m was short-term borrowing by securities dealers. Market makers had borrowed to buy gilt-edged stocks when the market rallied and have since sold them on, already repaying the additional bank loans. BBA lending to manufacturing industry fell by pounds 75m last month, after rising by more than pounds 1.5bn in the past four months. But the drop was an aberration due to the fact that one manufacturer had borrowed pounds 150m through an issue of promissory notes, equivalent to a bank loan but not included in the statistics.
There was also about pounds 2bn in new lending by foreign banks. The breakdown of these loans is not yet available, but they are likely to have been made to the company sector in the main.Reuse content