BBA: Interest rates affecting borrowing patterns

Higher interest rates are affecting the way people borrow claims the British Bankers’ Association (BBA).

Gross mortgage lending was five per cent higher than a year ago, claims a new report by the BBA, though mortgage approvals have fallen 12 per cent and new loans on credit cards dropped by £117 million.

David Dooks, BBA director of statistics, said: "Strong levels of gross mortgage lending reflect homebuyers and homeowners seeking out fixed rate mortgages as protection against rising interest rates.

"However, in the last two months net lending has risen less sharply and, compared to the same time last year, the number of mortgages approved in March was lower, indicating that weaker demand is starting to emerge."

He added that an overall fall in personal borrowing is impending as people seek to reduce their commitments in the light of higher interest rates.

Another indicator of the state of personal borrowing is that borrowing through personal loans and overdrafts fell by £47 million, whereas it had recently been seeing an increase of £127 million per month.

High inflation and the continued house price rises have led many experts to expect a quarter point interest rise when the Bank of England meets in May, taking the base rate to 5.5 per cent.