Demand for loans from both individuals and businesses has continued to be subdued, despite the fact that the latest figures from HMRC have shown the number of property transactions in July was the highest so far this year.

Outstanding debt

New figures from the British Banking Association (BBA) show that the amount of money outstanding on personal loans and overdrafts currently stands at £52 billion, the lowest level for 10 years.

Even though the number of mortgage approvals rose slightly in July these figures seem to indicate that consumers are still nervous about the economy and are trying, where possible, to reduce their levels of debt.

Savings

Despite inflation rising and interest rates remaining at historically low levels the figures from the BBA show that personal deposits with banks and building societies rose in July by £8.6 billion, but still down from £16.3 billion at the same time last year.

When considered alongside the falling levels of consumer debt it would seem that people are generally becoming more cautious with their finances, although perhaps due to the rising cost of living, saving is clearly harder in 2011 than it was in 2010.

Business

The level of outstanding loans to businesses also fell, with companies repaying more debt than they took on.

David Dooks, statistics director at the BBA, said: “Overall companies’ appetite for finance remains low, reflecting business decisions in difficult trading conditions – new finance made available to one company is simply being offset by debt repayment from another.”

Mortgages

Figures released by HMRC showed that 79,000 homes were sold in July, the highest level so far in 2011, but still 10,000 lower than the same time last year and around half of the level sold at the height of the property boom in July 2007 when 151,000 homes were sold.

The BBA have also released figures showing that the number of mortgage approvals rose slightly in July.

It would seem that tight lending criteria, worries over job security and a reluctance from sellers to lower their asking prices are all contributing factors to the relatively low level of transactions.

The property market commentator, Henry Pryor believes that the number of potential buyers who could actually proceed with a transaction is limited, he said:  “While there are huge numbers of so-called tyre kickers looking at [property] websites, those who can qualify for a mortgage or who have the additional equity required are small in number,”

He continued “As a result, only one in three homes are actually selling.”