News
Bank data challenges recovery
The latest figures from the Bank of England (BoE) have cast doubts over a potential market recovery, with mortgage repayments outstripping new lending in July for the first time since records began in 1993.
The statistics show homeowners repaid £400m more than they borrowed during
July, compared to an increase in net lending of £100m in June, and well below the
previous six-month average of £700m.
Total net lending to individuals also turned negative for the first time, falling by
£600m in July. The twelve-month growth rate fell to 0.9% from 1.2% in June, which
was the lowest rate of growth since statistics began.
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors
(RICS), said the drop in net lending was due to a restriction of new advances from banks and building societies and people using low interest rates to pay their debts.
He added: “Banks are still wary about lending, despite the BoE’s efforts to increase
the flow of money.”
Brian Murphy, head of lending at theMortgage Advice Bureau (MAB), said it
was hopeful that the lending figures would improve in the autumn.
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He said: “Lenders have reined in credit this month. However, lending should increase
as more buyers return to the market after the traditionally quiet summer period
because the BoE has made significant steps to encourage greater volumes of lending.”
Howard Archer, chief UK and European economist at IHS Global Insight, said the
figures showed that the housing market still remained fragile, despite reports of price
rises and buyers returning to the market over the last few months.
He concluded: “We do not think there will be a recovery in the market despite positive
surveys, because economic weakness, rising unemployment and low wage growth will
lead to a negative housing market for the foreseeable future.”