Surge in loans to home buyers and companies
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Your support makes all the difference.THE REBOUNDING economy brought a surge in lending both to companies and home buyers last month, figures from banks and building societies showed yesterday.
Total mortgage advances by both groups of lenders amounted to pounds 9bn in May, up from pounds 8.8bn in April, and 28 per cent higher than a year earlier. There was also a sharp drop in the share of the total accounted for by remortgaging as opposed to house purchase.
The British Bankers' Association said lending to non-financial companies rose markedly during the month, spread across most industrial categories. The biggest increases were in loans to retailers and drinks manufacturers.
The detail overshadowed a much smaller rise in total lending last month compared with April. The banks lent just pounds 1.8bn in total but this was distorted by bigger than normal transactions in the gilt repo market.
The latest evidence of resilience in the housing market follows reports of rising house prices and shortages of property for sale.
Michael Coogan, director general of the Council of Mortgage Lenders, said: "The soft landing for the UK economy is echoed in consumer confidence."
The CML said the average variable rate on new loans in May was 5.53 per cent, down from April's 5.64 per cent.
But Mr Coogan added it was important not to get carried away. "Activity in the market is buoyant but it is not at all like the frenzied housing market of the late 1980s." The average advance was 2.24-times income for first-time buyers, unchanged from the past few years.
Building societies gained market share from banks during the month, accounting for just over 26 per cent of May's lending total. The Building Societies Association also claimed success in the savings market, with a net inflow of pounds 1.1bn, the highest since last October.
Separate Bank of England statistics yesterday showed growth in M4, the broad money measure, slowing to 7 per cent from 7.3 per cent in April. The Monetary Policy Committee has indicated that it thinks this pace of growth is consistent with the 2.5 per cent inflation target.
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