UK lending remains at record lows

Lending to companies and households fell in April by the most since records began more than a decade ago, in a sign that the UK economy remains in the grips of the credit crunch.

Borrowings by the private sector fell by 0.1 per cent in the month, implying a net repayment of debts, after rising by 0.2 per cent in March. That was the only decline in outstanding loans since the Bank of England began collecting the data in 1997. The annualised growth rate over the last three months of 1.2 per cent is also the weakest since records began.

The slowdown in lending points to the still tight credit conditions facing businesses and individuals, serving as a warning that while green shoots are emerging in the economy, low levels of lending by banks and borrowing in the private sector could kill them off.

The figures provide little evidence that the Bank’s programme of quantitative easing - creating money to buy mostly government debt in order to encourage lending and spending - was helping boost credit, two months after the unprecedented policy was put into action. But Mervyn King, the governor of the Bank, has said it could take six to nine months for its effects to be clear.

“With lending growth to the non-financial sector still sluggish, we still find it hard to see how a strong and sustained recovery in the wider economy is possible,” said Vicky Redwood of Capital Economics.

“Today’s figures are the clearest indication yet that the BoE’s aggressive quantitative easing policy did not have much immediate impact on broad money and credit growth. It is still early days, but that could imply that the MPC ends up having to ramp up its purchases even further,” said Colin Ellis, economist at Daiwa Securities SMBC.

Lending to the household sector rose by 0.2 per cent over the month for the fourth month in a row, but fell to a record low of 2 per cent from 2.1 per cent in the three months to April annualised. That compares with an average of 10.5 per cent growth between 1997 and 2007.

Mortgage lending continued to show signs of picking up, albeit from historically low levels. Mortgage approvals for new house purchases rose from 40,038 in March to 43,201 in April, an increase of 7.9 per cent. Mortgage approvals have now risen for three months in a row and are at their highest since April 2008.

But they are still almost 60 per cent lower than their average between 1997 and 2007. Capital Economics estimates that approvals for new house purchases must be at 80,000 for prices to be stable. Recent data has suggested that house prices may be past the most rapid point of decline, but weak lending, low demand, job losses and lower earnings growth all militate against a rapid recovery.

The data from the Bank came as the construction purchasing managers’ index jumped sharply to a 12-month high of 45.9 in May from 38.1 in April and a record low of 27.8 in February. The fourth month of increase in a row left the index closer to the 50 level that divides contraction from expansion in activity.

http://www.ft.com/cms/s/0/7088ff14-4f5a-11de-a692-00144feabdc0.html?nclick_check=1

 

Instead of NYC property, are you considering a British or Irish castle instead?

 

Too aristocratic, sorry !

 

?.......a swiss ski chalet?