Borrowers unfazed as lending rises

The amount borrowed on mortgages, credit cards, personal loans and overdrafts continued to rise in June, the British Bankers Association (BBA) said today.

The highest amount on records was lent on mortgages as a total of ?17.95bn was advanced by the major banks during the month. Net lending, which doesn't include redemptions or repayments, also hit a new high of ?6.43bn.

The number of new loans approved also remained strong during June, with 230,200 mortgages worth ?18.9bn approved. This was the highest number of loans to be approved since March, and 4% above May's figure. A rise in the number of people remortgaging and releasing equity from their homes was behind the increase.

The number of mortgages approved for house purchase remained stable, but the average amount borrowed by people buying a new property rose to ?118,100, up ?3,000 since May and ?18,000 since June last year.

David Dooks, BBA director of statistics, said: "The rise in net lending over the second quarter of the year was virtually the same as in the first, showing that with due regard to monthly fluctuations, the buoyant trend in mortgage lending has remained fairly stable over the first half of the year.

"The composition of future demand is difficult to read. Approval numbers show that remortgaging and equity withdrawal loans are running below last year's comparative months, whereas loans for house purchases have been consistently higher, despite rising property prices."

People spent a total of ?8.2bn on their credit cards in June, a large increase on May's total of ?7.48bn, according to figures.

However, repayments on credit card debts meant the total outstanding balance on UK cards was ?450m, the same as the previous month's increase and slightly below the recent average.

Borrowing on overdrafts and personal loans was slightly up on the previous month, with people borrowing ?3.22bn in June, slightly above the average for the previous six months.

But again, consumers appeared keen to clear their debts. After repayments, the total outstanding debt rose by ?656m, up from ?539m in May and ?448m in April, but down on March's high of ?907m.

Britons now owe a total of ?32bn on credit cards and ?57.69bn through personal loans with the major banks.

The Bank of England is expected to release figures showing consumers now owe more than ?1 trillion in mortgages, loans, overdrafts and on credit cards.

Commenting on the figures Vince Cable, Treasury spokesman for the Liberal Democrats, said:

"The rise in mortgage lending by banks and building societies is recklessly fuelling the housing boom. The recent interest rate rises do not appear to have deterred large numbers of people gambling on the house price boom.

"In a week when the Bank of England is expected to announce that we are ?1 trillion in debt it is absolutely imperative that Gordon Brown takes action to protect ordinary homeowners against irresponsible lending."