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December 27, 2012 1:41 pm
Cautious households are paying back “virtually as much as they borrow” and holding on to cash, according to the British Bankers’ Association, which reported a 6.3 per cent rise in personal deposits in the year to November.
The BBA reported a pick-up in new mortgage lending in November, which rose to £7.7bn in November, above the monthly average of £7.4bn for the preceding six months. But it was nearly matched by repayments of capital of £7.5bn, as households took advantage of low levels of interest rates to repay debt.
Monthly credit card spending of £7.3bn in November was above the six month average of £7.1bn and resulted in net lending of £200m. But after taking account of relatively weak demand for loans and overdrafts, net consumer credit lending fell by £100m in the month.
David Dooks, the BBA’s statistics director, said: “Households are . . . continuing to repay virtually as much as they borrow and, as people hold on to cash, deposits are growing by 6 per cent annually. The situation is not dissimilar in the business world – businesses are holding back investment or expansion plans and building up cash reserves.”
The BBA said that inflows into cash Isa accounts remained strong this year as people sought accounts that paid better rates of interest, leading to a 6.3 per cent rise in all personal deposits over the year to November.
Borrowing by non-financial businesses fell £3.1bn in November, compared with a monthly average of £900m in the previous six months. The BBA said businesses were continuing to reduce debt while waiting for more certain trading conditions and a rise in customer and market confidence.
In the year to November, net mortgage lending grew 0.4 per cent, credit card lending rose 5.3 per cent, but personal loans and overdrafts contracted significantly by 7.8 per cent. The outstanding level of borrowings on personal loans has fallen to nearly half its peak in late 2007 to early 2008.
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