LENDING by the major UK banks to companies fell again in October, industry figures have revealed.
However, publishing the latest monthly figures yesterday, the British Bankers' Association (BBA) again highlighted the impact of moves by companies in the real estate sector to reduce their borrowing.
The BBA survey shows that lending by the major UK banks to non-financial businesses fell by a net £2 billion in October, having dropped by £1.8bn on this basis in September. The fall in October was more than double the average net monthly decline of about £900 million in the previous six months.
And the BBA noted that borrowing by non-financial companies had contracted by £13.9bn over the year to October. However, the industry body declared that much of this fall had been within the real estate sector.
The BBA added: "There is positive and sustained growth in (lending to) the manufacturing, wholesale and retail sectors."
Howard Archer, chief UK economist at consultancy IHS Global Insight, highlighted his belief that underlying bank lending to businesses was improving.
But he noted the Bank of England's regional agents had indicated credit conditions generally remained easier for larger companies than smaller firms.
The BBA figures also show a further sharp fall in the number of mortgage approvals for house purchase.
The number of mortgages approved forhome buying, rather than for other purposes such as remortgaging, came in at a 17-month low of 37,076 in October. This was down from 39,127 in September. It was also well adrift of the average monthly number of mortgage approvals for house purchase - of 41,549 - in the April to September period.
Matthew Pointon, property economist at consultancy Capital Economics, said: "The further fall in mortgage lending reflects an acute weakness in housing demand. While the dip in lending earlier in the year chiefly reflected the impact of new mortgage regulations delaying some applications, we would have expected that disruption to have largely passed by now."
He added: "The recent malaise is therefore likely to reflect buyers being put off by concerns over future rises in interest rates and a lack of choice of homes on the market. It is also possible that banks have been wary about boosting lending while new rules over minimum leverage ratios were still uncertain and tough stress tests due before the end of the year were in sight."
Mr Archer said the BBA figures added to "now pretty widespread and compelling evidence that the housing market has come well off the boil."
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