Consumer debt is continuing to rise as mortgage lending and credit card borrowing increased in July, according to the latest figures.
The British Bankers' Association (BBA) released figures today which highlight a 10% increase in the number of mortgages approved in July compared to the previous month.
The increase in mortgage lending was mainly driven by loans approved for remortgaging and equity withdrawal, suggesting that more and more people are using the rising value of their homes fund further borrowing.
Loans for remortgaging increased by 23% in number and 43% in value compared to the same time last year. Loans for equity withdrawal increased by 35% when compared to July 2002 and were 40% higher in value than a year ago.
The average house purchase loan is now 19% higher than it was year ago at £105,900, whilst July's mortgage lending is well above the average for the last six months.
New borrowing on credit cards was 12% higher in July when compared to the previous year and now stands at £7.4 billion. Credit card lending nearly doubled in July to £396 million compared to £199 million in June.
However, personal loans lending, including loans and overdrafts, fell by 10%. Seasonally adjusted, net lending in personal terms (excluding credit cards) rose by £335 million almost half of the £630 million rise recorded in June 2003.
The figures suggest that consumers are putting their borrowing onto long-term loans. They are using the rise in the value of their homes to consolidate credit card and personal loans.
Roger Brown, BBA executive director, commented, 'Both gross and net mortgage lending were stronger in July and the approvals data for the month were robust. A notable feature of the approvals data was the scale of the demand for loans for equity withdrawal. Credit card lending recovered in July following the modest rise in June, though this was offset by weaker growth in other unsecured lending.'