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Banks are still starving households and businesses of lending despite desperate efforts by the Government.
The British Bankers' Association today said net mortgage lending increased by just £1.6 billion in July — the lowest level since October 2000.
Lending to businesses fell by £4.1 billion last month, far more than the £300 million decline seen in June, as firms repaid loans far quicker than banks extended them.
It came despite pressure from the Government on banks to provide households and businesses with the funds required to stimulate demand and drive the economy out of recession.
Banks insist they are lending to trust-worthy borrowers but are restricted in what they can do because of rules forcing them to hold more cash in reserve to protect them from financial and economic turmoil and cover future losses.
Despite the fall in the value of mortgage lending, 38,181 home loans for house purchase were approved in July compared with 35,564 in June.
BBA Director of Statistics David Dooks said: "The numbers of mortgages approved for house purchase each month by the high street banks have continued to recover from last November's low point, but new lending is largely being offset by repayments, so that net rises remain relatively weak.
"Unsecured borrowing is subdued, with households focused on managing their personal finances and building up deposits.
"Lending to non-financial companies has contracted over the last year, as would be expected given both the recession and large corporates using the capital markets to raise funds, but amounts outstanding are only 3 percent lower than a year ago."
Reader views (4)
All the banks do is milk the poor customers, tax there profits at 90%
- Richard Edmunds, Rayleigh Essex, 25/08/2009 12:12
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The £41m mortgage fraud rported by Chelsea BS last week followed by the £100m increased mortgage fraud provision by Bradford& Bingley means that the banks have to be more circumspect on lending otherwise there is a risk of more sub-prime lending.
Consumers are rightly saving for a rainy day as unemployment is rising and there is a high probability that interest rates will rise in the long term. Certianly most of the fixed rate mortgage loans are expiring and being replaced at standard variable rates at which time borrowers will have to remortgage. Clearly then the banks are going to vet applications for fraud and the borrowers ability to afford the new mortgage against the decreased property value.
The government should follow the banks example and start getting a grip on the national deficit and how its spending taxpayers money otherwise we will all suffer without a clearly defined exit strategy from the quantitative easing thats financing the country.
- Sam, London,UK, 25/08/2009 11:45
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If 'firms repaid loans far quicker than banks extended them', then banks are hardly starving people of credit are they? Oh, and William, the average bank employee on the High Street is not part of the 'bonus culture' you allude to - that's just a few headline makers which in real terms are insignificant in the overall bank picture
- Peter Bench, London, 25/08/2009 11:30
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Banks by Law have to be reponsible in their lending, plus have to have the dosh in hand to create wealth for employees through extension of bonus culture.
- William, Hay~Heath UK, 25/08/2009 10:38
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