Borrowing up amid interest rates speculation

http://www.bbc.co.uk/news/business-34345531

Version 0 of 1.

Expectations of a rise in interest rates has prompted a pick-up in mortgage activity, and unsecured borrowing has also increased.

Although timing of any rate rise is far from certain, the British Bankers' Association (BBA) said "competitive" deals had driven increased lending.

Personal loan and credit card borrowing have also increased, the BBA said.

The figures come as Citizens Advice warned that problem debt for young adults is on the increase.

'Shrewd'

The BBA said there were 80,221 home loans approved in August by the major High Street banks.

Of these, 46,743 were for mortgages for house purchases, a 16% rise on the same month a year earlier. Remortgaging accounted for 25,540 approved home loans, a 38% rise compared with August 2014 and the highest level for four years.

"Remortgaging numbers also continue to be strong, as shrewd homeowners snap up competitive deals," said Richard Woolhouse, chief economist at the BBA.

Considerable comment regarding the timing of rising interest rates could have prompted some homeowners to lock into new deals. Many commentators now believe the date of any rate rise by the Bank of England could come later next year rather than earlier.

The Bank's chief economist Andy Haldane even suggested in a recent speech that the Bank might have to cut rates to combat low inflation.

Mortgage brokers said that the relatively low mortgage rates on offer could be a response to a mismatch of supply and demand.

"The mortgage market remains over supplied with lenders having more money to lend than there are people looking for home loans. This means criteria will have to loosen and rates will have to remain low to ensure lenders hit their volume targets," said Mark Harris, chief executive of SPF Private Clients.

"For many, the main issue is not so much finding a cheap mortgage rate but being able to prove affordability to satisfy the lender and meet [the regulator's] tighter criteria."

Debt issues

The BBA figures also show that demand for personal loans has been rising and has expanded over the past two years.

"Increased demand for personal loans continues to reflect better credit availability, lower interest rates on personal loans and stronger household finances," it said.

Annual growth in High Street banks' credit card borrowing was 5.1% in August, it added.

A rise in unsecured borrowing, particularly by young adults, has been raised as a concern by charity Citizens Advice.