Mortgage lending in January turned out to be much stronger than expected, and lending to businesses appeared to pick up modestly, official data show.
The Bank of England data show that 58,728 new loans to buy houses were approved in January, the highest since December 2009, while net mortgage lending – new loans minus repayments of principal – was £1.6bn, much stronger than expected.
January’s figure for mortgage loans was significantly higher than the average of the previous six months, which was 52,839. However, re-mortgage activity fell back slightly as did other types of secured lending to households.
Lending to UK private, non-financial businesses - when the effects of securitisations are stripped out - rose by £2.2bn in January. However, when bank lending to such businesses – the backbone of the British economy – is looked at in isolation from other sources of credit, funding actually fell by £0.3bn on the month. Overall, the data suggest that, at least, the rate at which net credit is being withdrawn from business is slowing when compared with the rate in the second half of last year.
Economists said the surge in mortgage lending, while welcome news, could be a temporary phenomenon. “This surge probably reflects first-time buyers’ attempts to benefit from the stamp duty holiday on properties worth less than £250k, which is due to expire on 24 March,” said economists at Barclays Capital, in a morning note. “We would expect further increases in mortgage approvals in February and March, as a result, with a dip likely thereafter.”
Consumer credit showed a modest rise of £0.1bn in January, with growth occurring among loans and advances while credit card borrowings were flat. The tepid level of consumer borrowing coincides with other Bank of England data showing modest increases in the cost of consumer credit in January.
M4 money supply – a figure closely tracked by the Bank’s Monetary Policy Committee as it carries out its gilts purchases programme aimed at stimulating the economy – rose at a rate of 1.6 per cent in January after contracting in each of the previous three months. When money at financial intermediaries is stripped out, M4 rose by 1.9 per cent on the month.
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