Bank borrowing continues to climb, but BBA eyes 2017 softening

UK banks increased lending levels in December, according to data from the industry published on Thursday, though demand is expected to soften in 2017 as consumers and businesses anticipate higher interest rates.

The British Bankers' Association revealed that gross mortgage borrowing totalled £12.6bn in December, up 3.6% from the same month last year and 3.3% from November's £12.2bn.

Net mortgage borrowing grew by 2.5% year-on-year, with remortgaging approvals up 30% and at their highest level since October 2008.

consumer credit grew 6.6% despite weak retail sales as growth in personal loans remains supported by low interest rates.

Business borrowing declined £2.8bn to £261.7bn, which the BBA said was mainly due to seasonal reductions in demand from the construction and agriculture sectors.

“Reduced demand for business borrowing may signal plans for investment are being deferred or funded through retained earnings until there is more certainty on the UK’s economic prospects after Brexit,” said the body's chief economist Rebecca Harding.

Overall, she said levels of consumer and business borrowing remained high, although "there are early indications that 2017 could see softer demand for credit from business and households, as they anticipate future interest rate rises and wait for further clarity on Brexit".