Net Homeowner Loan Lending Reaches Lowest Point In Nine Years
Over the past few months there has been lots of positive news about the increasing numbers of homeowner loans and mortgages which are being approved for house purchase, as confidence returns to those looking to buy a new home, due to low interest rates on loans and relatively low house prices.
Although the figure for gross lending on new loan approvals reached £9.7 billion in July this year, the highest amount in the last 17 months, the latest figures from the British Banking Association (BBA) have revealed that the net lending figure only increased by £1.6 billion in July, which is the lowest level seen since October 2000.
The main reason for the low net lending figures is due to the fact that although new homeowner loans for house purchase are seeing a significant increase, a large number of borrowers with existing loans and mortgages are now focusing their attention on reducing the outstanding balance on their homeowner loan, or even paying it off altogether, taking advantage of the particularly low interest rates available at the moment to clear their debts.
The same trend is also apparent within the personal loan and overdraft market, as borrowers continue to repay more of their existing loan debts rather than applying for new personal loans. In July this year, borrowers repaid £303 million more than they borrowed on new personal loans and this has been the twelfth consecutive month where the amount repaid has been more than the amount borrowed.
David Dooks of the BBA said “The numbers of mortgages approved for house purchase each month by the high street banks have continued to recover from last November’s low point, but new lending is largely being offset by repayments, so that net rises remain relatively weak. Unsecured borrowing is subdued, with households focused on managing their personal finances and building up deposits.”
