UK mortgage lending unexpectedly rose the most in six months in May, the British Bankers’ Association (BBA) said.

UK mortgage lending unexpectedly rose the most in six months in May, the British Bankers’ Association (BBA) said.

Net lending climbed to £5.8 billion (S$17.74 billion) from a month earlier, the biggest increase since November, the London-based BBA, which represents the nation’s biggest banks, said in an e-mailed statement. That compared with 5.1 billion in April. From a year ago, borrowing fell 6 billion.

The figures are at odds with recent reports showing that the Bank of England’s four interest rate increases since August are cooling the UK’s property market.

The BBA said lending last month may have been distorted by the anticipated introduction of new property advertising rules, which have since been put on hold.

‘The recent trend in mortgage lending had been downward, so the stronger demand in May was somewhat surprising,’ David Dooks, director of statistics at the BBA said. ‘The cost of borrowing has increased because of interest rate rises, and that would moderate demand in future months.’

Mr Dooks said in an interview that last month’s increase may be due to banks taking market share from building societies.

The government last month delayed plans to introduce rules requiring homeowners to give buyers more information about their property after a legal challenge by the Royal Institution of Chartered Surveyors. The introduction of HIPs, originally planned for June, will be phased, and will begin on Aug 1 for four-bedroom and larger houses.

Separate reports yesterday gave conflicting signals on the outlook for UK mortgage demand. The Building Societies Association said approvals fell 13 per cent in May from a year ago while the Council of Mortgage Lenders said gross lending jumped 12 per cent last month from April.

HBOS plc, the nation’s biggest mortgage lender, said on June 7 that UK house prices rose at the weakest monthly pace of the year in May.

The Bank of England has lifted borrowing costs a percentage point since August to a six-year high of 5.5 per cent.

Yesterday’s BBA report also showed consumers were becoming more reluctant to add to their record £1.3 trillion of debt.

Net consumer credit fell £463 million, with borrowing through personal loans and overdrafts declining by £54 million and credit card lending decreasing by £409 million.

Source: The Business Times, 21 June 2007