Lending levels rise again in March

Consumers' appetite for debt showed no sign of easing last month, as both mortgage lending and unsecured debt surged ahead, figures showed today.

The British Bankers' Association reported a buoyant month, with lending through mortgages, credit cards, loans and overdrafts all strong.

The figures make it increasingly likely the Bank of England's monetary policy committee will raise interest rates when it meets in May in a bid to curb rampant consumer spending.

The Council of Mortgage Lenders, which also published its lending figures today, said the surge in mortgage advances was driven by a 24% rise in lending for house purchase, which increased to ?11.3bn and accounted for 46% of all lending.

Remortgaging rose by a more subdued 12% to ?10bn, while people also released ?2bn of equity from their homes.

"It now seems clear that the housing market has experienced an upswing in the first quarter of this year," said Michael Coogan, the CML director general. "Buyers who could not decide whether to enter the market last year may now be deciding to buy because they think they may be priced out of the market if they postpone their decision any further.

"But the scale of activity has been stronger than we would have anticipated, and we now expect the Bank of England to be watching the housing market very closely."

Net lending, which strips out redemptions and repayments, rose by ?5.96bn during March, compared with February's jump of ?5.55bn, while the Building Societies Association reported a ?1.32bn increase in net lending, up from ?1.2bn the previous month.

Lending through loans and overdrafts soared by ?911m during March, following a subdued increase of ?377m in February. Credit card lending also raced ahead, rising by ?484m, up from ?368m.

David Dooks, BBA director of statistics, said: "Mortgage lending and consumer credit were buoyant in March. The month saw a large rise in mortgage lending and, with consumer credit rising by more than in February, individuals' appetite for borrowing shows little sign of abating."

Meanwhile, the chairwoman of the National Consumer Council, Deirdre Hutton, said today that a reported six million families were now caught in the debt trap and were having problems keeping up with repayments.

Speaking at the British Bankers' Association's annual conference, she said that while people had a part to play in managing their borrowing, lenders needed to act responsibly too. "They should not be offering unsolicited automatic credit increases and cheques on credit card accounts if they haven't properly assessed borrowers' circumstances," she said.