But companies seeking more competitive borrowing rates are switching to foreign institutions, depressing domestic banks' lending business. The British Bankers' Association said mortgage lending had been the only part of lending by British banks to hold up well last month. Tim Sweeney, the BBA's new director-general, said: 'It is too soon for higher mortgage rates to have affected the lending figures since these loans will have been in the pipeline since before the recent rise.'
Loans to individuals rose pounds 660m in the month, but members' total lending rose only pounds 183m compared with an average of pounds 1.1bn for the previous six months. Mr Sweeney said: 'It seems likely that, due to a change in the pattern of relative interest rates, corporate treasurers may have switched short-term borrowing.'
Since the rate rise, it has been cheaper for companies to borrow from other sources, such as foreign banks, because of an unusually big difference between rates charged by British banks and money market interest rates. The financial sector seems to have taken particular advantage of this, repaying pounds 719m of loans to British banks.
The Building Societies Association said mortgage lending dipped from pounds 3.5bn in August to pounds 3.2bn last month. Net advances fell 1.6 per cent in the month, while net new commitments fell 2 per cent to pounds 2.97bn.
Adrian Coles, director-general of the BSA, said: 'Although the figures show slight falls in net and gross advances over the last two months, the lending market has remained relatively stable over the summer.' He said gross and net lending had regained their mid- 1992 levels, but the increase in societies' lending probably reflected a recovery in their market share.
The rest of the corporate sector continued to repay loans, with a net repayment of pounds 319m. The July- September quarter was the ninth in succession in which companies reduced their bank debt.
Michael Saunders, UK economist at Salomon Brothers, said: 'There are signs of a slight uptrend in credit growth.'
According to Bank of England estimates, the overall growth in broad money, of which lending forms one part, remained muted. The broad aggregate, M4, rose 0.4 per cent in September, its year- on-year rate of growth edging up to 4.8 per cent.
This remained well within the 3-9 per cent monitoring range, but the Bank revised up its estimate of narrow money growth in the year to September to 7.2 per cent from 6.3 per cent in August. The target range for M0, the narrow money aggregate, is 0-4 per cent.
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