Demand for bank lending slows
Banks saw a lack of demand for lending in July as Brits continued to be cautious about building up new debt.
We seem to be borrowing less. Unsecured credit has shrunk by 1.1% over the past year, while personal deposits rose by 3.8%, according to the British Bankers' Association.
But we are all saving a lot less than we used to. In the first seven months of 2011, deposits and savings increased by just £8.6 billion compared with £16.3 billion over the same period last year.
Over two years, credit card debt has expanded slightly but this is mainly down to the interest added to accounts rather than new debt. Repayment of loans and overdrafts continues to outweigh new lending.
Mortgage lending was flat in July with gross lending remaining at £7.6 billion, the same as the previous month. That follows an 11% fall in gross mortgage lending between May and June.
It isn't all bad news for the housing market though. Slightly more home loans were approved in July and the average house price of £151,500 was 2% higher than last summer. And mortgage repayments have remained fairly high, leading to a very small increase in net mortgage lending by just £0.9 billion.
Growth in the buy-to-let market has led to a increase in the number of remortgage approvals which were 14% higher this July than at the same point last year.
Changing mortgages without moving home. Property owners chiefly remortgage to get a better deal but some do so to release equity in their homes or to finance home improvements, the costs of which are added to the new mortgage. Even though you’re not moving house, you still need to engage solicitors, conveyancing and the new lender will require the property to be surveyed and valued.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.