Home lending driven by spike in remortgage deals
Mortgage lending rose in May as borrowers sought cheaper deals while approvals for house purchases fell as economic activity remained subdued.
Gross mortgage lending increased 8.8% to £22.2bn from a year earlier, figures from trade group UK Finance. Approvals at the big high street banks rose 3% from a month earlier.
The increase was driven by remortgaging, which rose 18% from May 2017 as borrowers took up cheap deals with interest rate rises looking likely. Loans for people buying houses fell 3.8% in a stagnating property market.
Total consumer credit, which includes credit cards, personal loans and overdrafts, grew 3.9% from a year earlier, the slowest rate since January 2015.
Credit card spending rose 2.3% and at 193m the number of purchases was above the 12-month average of 181m. UK Finance said the slight growth was helped by warm weather and the Royal wedding.
Personal deposits rose at a slower rate of 1.6% on an annual basis but deposits in instant access accounts rose 4.4%. Business borrowing fell 2.5% in the past year as continuing economic uncertainty made owners reluctant to invest.
UK Finance said the broader picture was of subdued activity with household incomes squeezed. Worries about Brexit are also also clouding the economy.
Erid Leenders, UK Finance’s managing director for personal finance, said: “A large number of fixed-term mortgages came to an end [in May] and homeowners took advantage of a competitive market to shop around. Increased efforts by lenders to contact their customers before their current mortgage deal expires have also contributed to this rise.
“There was modest growth in card spending. However, the overall economic picture remains mixed. This may explain the growth of deposits held in instant access accounts, with consumers increasingly choosing to keep their money close to hand.”