Mortgage lending hits a three-year low
Wednesday, 31 August 2005
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Hopes of a revival in consumer spending took another blow yesterday from figures showing that mortgage lending hit a three-year low last month, while retailers suffered another gloomy trading session over the key bank holiday weekend.
The Bank of England said mortgage lending rose by £6.5bn in July, the lowest increase since June 2002 and well below analysts' forecasts. Consumer credit - spending on credit and store cards together with loans and overdrafts - rose by £1.2bn, less than the £1.5bn increase the City had expected.
Vicky Redwood, UK economist at Capital Economics, said: "The data on household borrowing and spending provide a consistent picture of continued weakness in consumer activity."
The figures revealed a particularly sharp slowdown in credit card spending, hitting a four-year low. The amount people owed on their plastic rose by £312m during the month, the lowest level since June 2001.
The figure came just hours after a survey from the CBI, the UK's largest employers' group, indicated that consumer spending remained weak in August. The CBI said that the balance of retailers reporting lower sales than a year ago was unchanged at minus 18 in August, meaning that for the past three months it has been at the lowest levels in the 22-year history of the survey.
The gloom was compounded by figures from FootFall, the retail traffic analysts, which said shoppers stayed away over the bank holiday weekend.
Its said visitor numbers to the UK's major retail centres were 9 per cent lower than at the same weekend in 2004. The fall was most severe on Sunday when the tense end to the fourth Ashes Test match kept people glued to their sofas, leaving shopper numbers down 17 per cent.
But Natasha Burton, FootFall's marketing director, said there were several factors behind the fall including the good weather and the early start to the high street sales.
However, there was a glimmer of hope from another modest increase in mortgage approval numbers, which are seen as a pointer towards the state of the housing market in the weeks ahead. Lenders approved 97,000 new loans, up by a 1,000 from the previous month.
