Continued weakness in mortgage lending

Latest figures from the Major British Banking Groups, for November 2004, show that:

* Total sterling lending to the UK private sector showed a net increase of £11.0bn (+1.1%) to £1,064.7bn. This was slightly stronger than October’s rise of £10.7bn but weaker than the average rise for the previous six months of £12.0bn.

* Underlying net mortgage lending rose by £4.0bn. This was the weakest seasonally adjusted monthly flow since January 2002. Growth in overall unsecured personal lending (+£1.0bn) was stronger than October. Whilst credit card borrowing (+£0.2bn) was a little lower than in recent months, loans and overdrafts rose by £0.8bn after increasing by only £0.3bn in October; well up on the recent average (£0.5bn).

* Lending to non-financial companies increased slightly in November. Borrowing by real estate companies (+£1.3bn) was in line with the average for the last few months. Lending to wholesale and retail trade decreased by £1.1bn after rising by £0.5bn last month.

* Overall lending to financial companies increased by £3.6bn, largely driven by lending to securities dealers (+£3.6bn).

* Deposits from the private sector rose by £6.6bn to £732.9bn. Of the total increase, personal deposits accounted for only £0.5bn, well below the recent monthly average (+£2.2bn).

David Dooks, BBA director of statistics, said:

"Mortgage lending continued to weaken in November, in line with recent approvals data. Within consumer credit, credit card borrowing was fairly weak despite stronger than expected retail sales figures, while other personal borrowing saw the strongest growth for some months after being very subdued in October.

Once again, strong lending to real estate companies dominated lending to the non-financial sector, in a month when the banks saw net repayments from most other industrial categories."

Analysis of MBBG sterling lending to UK public and private sectors

Lending to individuals (after allowing for the effects of securitisations, loans acquired from special purpose vehicles, transfers, acquisitions, etc – see note 4 below)

Net lending rose by £5,029mn in November, compared to £4,939mn in October and £6,061mn in November 2003. Mortgage lending accounted for £4,007mn of the rise, compared to October’s rise of £4,295mn. Within consumer credit, November saw an increase in loans and overdrafts of £800mn compared to October’s figure of +£307mn, while the rise in credit card borrowing (+£219mn) was well below the recent average (+£433mn).

Lending to financial firms

Lending to financial companies increased by £3,636mn, with lending rising to securities dealers (+£3,611mn) and financial intermediaries (+£691mn), while insurance companies and pension funds repaid £660mn.

Lending to non-financial firms

Lending to real estate companies (+£1,349mn) increased strongly, though there were few significant changes in lending to most other sectors. In particular, lending to retail trade fell by £888mn as a short term loan unwound and lending to construction rose by £194mn.