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Banks optimistic despite fifth consecutive fall in lending

Banks remain optimistic despite lending having fallen for the fifth consecutive month in December.

New figures from the British Bankers’ Association show a total of £10bn was advanced in December 2014, down 12 per cent from £11.4bn a year earlier. Further, December’s lending was the lowest since July and has fallen each month since then. 

However, banks lent £130bn in 2014, meaning they retained a 63 per cent market share – which is unchanged from 2013.

But despite the winter lull, BBA chief economist Richard Woolhouse remains optimistic about growth in lending this year.

He says: “The mortgage market has been softening since the spring, but for customers taking out home loans right now there are some great deals and we expect the market to begin to grow again this year.”

Banks’ house purchase approvals plummeted 24 per cent from 46,930 to 35,667 between December 2013 and 2014.

Remortgages continued to lag in December, with a 20 per cent decline in approvals from 21,916 in December 2013 to 17,533 last month.

Enterprise Finance chief executive Danny Waters says the tail-off in lending towards the end of last year was down to election uncertainty and the on-going effects of MMR.

He says: “This is more than a winter dip. The decrease in gross mortgage borrowing in December can be partly attributed to seasonal factors at this time of year, but that doesn’t explain why it is 12 per cent down year-on-year.

“This significant reduction is more likely to be explained by pre-election uncertainty on behalf of buyers and sellers alike – and by lenders still getting to grips with how MMR has impacted their dealings with borrowers.”

The figures are taken from the six largest UK retail banking groups, including Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland, Santander and Virgin Money. They account for some two-thirds of UK mortgage lending.

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  • iblameblair 27th January 2015 at 6:45 pm

    You forgot to mention buy to let lending increased 22% in the last 12 months; that’s where the growth will be as millions are now excluded from home ownership forever. Paragon, Fleet mortgages et all lending millions to scumlords, renting out rooms to cash strapped young people.

  • Chris Hulme 27th January 2015 at 5:08 pm

    Thanks for the clarification Paul.

    My commentary is more about the analysis in terms of the wider market. As a broker, we have certainly seen the last 5 months pick up pace with the smaller lenders of which building societies have taken the lions share. I suspect that could be a reason for the banks experiencing a fall over the latter half of 2014 which does appear to be continuing into 2015 – so far….

    It is of course early days but there’s some serious competition out there for the big banks, not just on rate but more about criteria which is where lenders need to improve across the board.

  • Paul Thomas 27th January 2015 at 4:24 pm

    Hi Chris,

    The BBA only provides figures for its members (banks) but we tried to give an idea of the wider picture in paragraph 3, where we have calculated the market share of the banks in 2013 and 2014.

    Thanks,

    Paul

  • Chris Hulme 27th January 2015 at 4:04 pm

    It’s an interesting headline and is certainly one that should prove accurate by the close of 2015.
    What seems a touch bizarre in this new market is that the figures are taken only from the Yardstick of the 6 largest banks analysing therefore only two thirds of the full market.
    Given the building societies seem to have run rings around the big boys in the latter part of 2014, the “big six” may well find 2015 a year for being knocked for six if the challenge from smaller societies goes unchecked. If you also bring in the challenger banks like TSB this year could see a serious war. Goliaths may fall. You may then need a new Yardstick.