Lending falls at record pace but mortgage approvals rise
NET lending to individuals and companies fell over July at its sharpest pace since records began in 1993, threatening the strength of the UK’s economic recovery.
The weak data came despite a rise in mortgage approvals and positive signs from quantitative easing.
Data from the Bank of England yesterday showed that lending to non-financial companies fell by £14.8bn in July on June and they paid down £8.4bn debt during the month.
Total net lending to individuals fell by £0.6bn in July, showing a net repayment for the first time in the series, while consumer credit fell by £0.2bn.
Richard McGuire, fixed income strategist at RBC Capital Markets, said: “The fact that consumers are, in aggregate, opting to pay down their debts is reflective both of the dearth of affordable credit and, more fundamentally, a flight to savings that we expect will continue in line with the ongoing slackening of the jobs market.”
The number of approvals for home purchase rose to 50,123 in July from 47,891 in June and came in slightly below analysts’ forecasts of 51,000. But the approvals were still well below pre-crunch levels.