Lending to Britons expanded at pace last month, which along with a strong rate of mortgage approvals is providing real evidence of resilient consumer demand.
Consumer credit in October increased by 1.62 billion pounds, up from 1.48 billion pounds in September, the strongest growth since October 2005 (1). The Bank of England data also showed that annual growth has increased to 10.5%. The mortgage approval data for house purchases showed an increase in approvals to 67,518 in October up from 63,594 (2) in September; a figure that exceeded many analysts’ expectations (1). This increase, fuelled by low interest rates, bucks the downward trend of 2016.
Ruth Gregor from Capital Economics, said: “October’s UK money and credit figures provided further evidence that the slowdown in mortgage lending has bottomed out and that the appetite for debt hasn’t taken much of a hit following the Brexit vote.”
Mark Carney, the governor of the Bank of England, Mark Carney has responded to the figures by giving a warning about the high level of debt in UK household. He particularly focused on the amount consumers were borrowing more on their credit cards and other forms of unsecured debt, promising to keep vigilant on the issue (3).
While Britain’s economy has performed much better than many had expected in the aftermath of June’s vote to leave the European Union, there are undoubtedly considerable challenges for the economy coming in 2017.
The rising inflation caused by the falling pound’s post-referendum plunge looks set to hit household spending. Although spending might not be showing it, surveys are starting to show that householders are starting to show concern about rising inflation (2). The Bank of England expects inflation to peak at around 2.75% next year compared to above its 2% target (2).
Looking at the business picture The Bank of England said business lending increased for a second month in a row to £3.15 billion up from £1 billion in September. Economists though are still expected business investment to slow in the New Year. (1)