But figures from the British Bankers’ Association showed that house purchase approvals bucked the trend by rising 5% to 41,588 in August against the previous year.
Compared to July, the number of approvals across all categories took a knock with an overall decline of 3% to 67,019.
Gross lending grew by 15% to £11.1bn and the overall mortgage stock was 1.4% higher than a year earlier.
Last week the Council of Mortgage Lenders reported gross mortgage lending for August to be £18.6bn, a 13% increase year-on-year but it warned that a gentle slowdown was on the way.
The average value of house purchase loans increased from £156,800 to £161,200.
Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), said: “Despite August traditionally being a quieter period for the mortgage market, increased confidence among lenders and consumers shone through, resulting in a 15% annual boost in mortgage lending.
“Healthy competition between lenders means that consumers can take advantage of preferential rates, while MAB data shows that more than 12,000 products were available on the market in August – a post-credit crunch record high for consumer choice.”
“While the remortgage market has not yet seen the same level of recovery as purchase loans – with overall remortgaging levels down on last year – we can expect to see activity increase as interest rate rises edge closer, making locking into a low rate deal top of consumers’ priorities.
Credit card spending of £8.3bn was the same as in August a year earlier.
However, with repayments generally exceeding spending, annual growth has moderated, said the BBA.
Higher unsecured loan demand reflects rising consumer confidence and improving household finances. Net borrowing through personal loans and overdrafts is showing rising annual growth after contracting for a long period.
David Dooks, statistics director at the BBA, said: “When customers feel more optimistic about the economic outlook they are much more likely to take on new borrowing.
“Today’s figures show that mortgage lending in August was up 15% on last year and that credit card spending remains robust. But I was particularly struck that after years of decline, demand for unsecured personal loans is rising quite strongly again.”
Dooks said unsecured loans are often used to finance bigger purchases such as cars or major home improvements – the sort of spending which is put off until consumers felt confident about their financial circumstances.
