Borrowing in the UK drops in January

Overall borrowing dropped in the first month of 2013, with a particularly bad hit taken by mortgages. The British Bankers’ Association (BBA) said that, when compared to January 2012, the amount of cash lent through mortgages was 14% lower. The average amount given out in each mortgage fell, as well as the total number of mortgages approved.

The number of loans and other forms of credit also dropped, with people spending less on credit cards and instead choosing to repay more debt than would otherwise be the case. This may be because of the looming threat of a triple-dip recession, but some people are just blaming the cold January this year, with overall economic activity also set to drop.

David Dooks, the statistics director of the BBA, attempted to explain the drop away in a fashion that would only prove temporary: “January’s severe weather impacted adversely on what was already a subdued picture of borrowing demand from households and businesses. While general economic growth stalls, low consumer and business confidence generates a natural tendency to restrain borrowing appetite, repay borrowing where possible and to build up cash and savings as a buffer.”

However, there is the view floating around that perhaps the bad weather had little to do with this. After all, the funding for lending scheme is still in operation and keeping the rates low, and there is a difference between popping down to the high street in the snow and continuing to secure a mortgage. Because of that, the chief executive of SPF Private Clients, Mark Harris, ended up sounding a little sceptical when asked about the situation: “As with the Council of Mortgage Lenders’ lending figures for January, the BBA figures show a more subdued market which might be blamed on the bad weather. We would have expected stronger figures because of the excellent mortgage rates now available as a result of the FLS; it goes to show that we remain some way off a sustained recovery in the housing market as caution continues to prevail.”

Regardless of the reason, this demonstrates that even an early promise being shown by schemes to aid financial recovery can deflate, and that there is no sure road to lead us there.

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