Consumer lending soars as mortgage approvals slide

Lending to consumers surged at its fastest rate in nearly a decade in the three months to November, and business lending showed some signs of picking up despite a continued slowdown in the housing market.

The Bank of England said that consumer lending beat economists’ expectations to rise at an annualised rate of 8.3 per cent in the three months to November, a pace last seen in October 2005.

Mortgage approvals for house purchase dropped less than expected to 59,029 in November, from 59,511 in October, the lowest level since June 2013 when Britain’s housing market was starting to pick up.

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Analysts had forecast a fall to 58,500, and last month the British Bankers’ Association reported the lowest number of approvals by its members since April 2013.

Regulators required lenders to make more detailed checks on borrowers from late April onwards, and since then the Bank of England has limited the proportion of mortgages that banks can issue at high multiples of a borrower’s income.

With just over four months before the next national election, the figures suggested British consumers will continue to power Britain’s economic recovery going into 2015.

The BoE data chimed with official national accounts data last month, which showed household spending rising at its fastest pace since the second quarter of 2010 in the three months to September, as well as private-sector surveys showing strong appetite for big purchases.

The BoE also showed signs that businesses’ reluctance to borrow from eased in November, particularly in smaller firms which have historically found it hardest to get credit.

Net lending to businesses dropped by £149m, the smallest decline since August, and lending to small businesses rose by £286m, the biggest increase since records started in May 2011.

Annual house price growth - as measured by lenders Halifax and Nationwide - has slowed in recent months to annual rates below 10 per cent and forecasters expect slower growth in 2015.

The BoE said net mortgage lending - which lags trends in approvals - rose by £2.059bn in November, up from growth of £1.595bn in October, and the 12-month growth rate rose to its highest since March 2009.

The BoE’s preferred gauge of money supply rose 2.9 per cent, its slowest growth rate since February 2012.