LAST month's half-point rise in interest rates has not yet had a
significant impact on mortgage lending, the Building Societies'
Association claimed yesterday.
But it warned that further increases in rates could damage the housing
market.
Gross mortgage lending by the societies fell from #3451m in August to
#3192m in September, and net new commitments dropped 2% to #2970m.
The association deliberately avoided over-reacting to the tentative
signs of a slowdown in lending. Instead, its director-general, Adrian
Coles, concentrated on the positive trend in lending in the third
quarter.
''Gross advances in September remained above #3000m for the fourth
successive month,'' he said.
''Although the figures show slight falls in net and gross advances
over the last two months, the lending market has remained relatively
stable over the summer,'' he added.
Gross and net lending in the third quarter were 10% and 15% higher
respectively than in the second. Compared with the same period last year
the gains were 16% and 32% respectively.
Current lending levels are similar to those in the same period of
1992, but Mr Coles argued that it was likely that the growth in
societies' lending represented a recovery in market share rather than in
the housing market itself.
''The rise in interest rates on September 12 does not appear to have
had a significant impact on lending in the month,'' he said.
''Net new commitments fell only slightly in September suggesting that
confidence had not been significantly harmed.
''The outlook for the rest of the year is for a cautious, yet
relatively stable market, though this could be damaged by any further
increases in interest rates.''
Higher interest rates do, however, seem to have boosted the amount of
new money flowing into the societies' coffers.
Net receipts totalled #322m last month after #91m in August. The flow
of funds into building societies has been picking up after a period in
the winter when there was a net outflow in five consecutive months.
Mr Coles said the September inflow was the largest since May and it
reflected seasonal factors as well as the increase in rates.
''The launch of new savings products may also have helped to boost
societies' inflow in spite of the competitive state of the savings
market and the aggressive action by National Savings after the rise in
interest rates.''
Neither the building society figures nor money supply data from the
Bank of England had any impact on financial markets. Much more
significant will be the Central Statistical Office's first stab at
estimating third-quarter gross domestic product this morning.
City economists expect growth in GDP to slow down from the second
quarter's heady rate of 1.1%, which played a significant part in the
decision to raise interest rates. The consensus forecast is growth of
0.7% in the third quarter, but the range is unusually wide, from 0.4% to
1.2%.
M4 lending to the private sector by the banks and building societies
increased by a seasonally-adjusted #3000m last month, after rises of
#1900m in August and #1200m in July.
Broad M4 lending grew by a seasonally-adjusted 0.4% in September,
taking the annual rate up from 4.7% in August to 4.8%, in the bottom
half of the 3% to 9% monitoring range. The recent trend is even weaker.
Over the latest three months the annualised growth rate was 3.4% and
over the latest six months 3.2%.
The M0 figures were revised upwards a decimal point. The growth rate
in September is now 1.1% and the annual rate 7.2%. But this was due to
revisions to the erratic figures for bankers' balances. Notes and coin
growth remained at 0.6% last month and 7% in the year to September.
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