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BSA: Lending affected by interest rates

20 July 2007

The recent series of base interest rate rises by the Bank of England`s monetary policy committee has affected lending figures, according to the Building Societies Association (BSA).

Gross and net advances, as well as loan approvals, all fell last month in comparison with the same period the year before, BSA data indicates.

Approvals decreased from £6,046 in June 2006 to £4,693 last month, the statistics reveal.

"Borrowers should be careful about overstretching themselves at this time of rising interest rates and take on new borrowing only if they are sure they can afford to service it," remarked Brian Morris, head of savings policy at the BSA.

"With many commentators expecting another rate rise soon, lending may well cool further over the remainder of the year and into 2008."

He added that the "robust lending criteria" used by building societies could be a reason for the slowdown.

Moneyfacts recently suggested that the rates charged on personal loans have been rising as an effect of the recent base rate hikes.

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