UK con­sumer loan cuts loom

Business Day - - FRONT PAGE - Andy Bruce and Huw Jones London

Bri­tish len­ders were plan­ning the big­gest cut­back in con­sumer loans in nearly 10 years, the Bank of Eng­land said on Thurs­day, after it warned re­peat­edly about the strong pace of lend­ing to house­holds.

Bri­tish len­ders are plan­ning the big­gest cut­back in con­sumer loans in nearly 10 years, the Bank of Eng­land (BoE) said on Thurs­day, after it warned re­peat­edly about the strong pace of lend­ing to house­holds.

The BoE’s quar­terly net balance of len­ders’ ex­pec­ta­tions for the avail­abil­ity of un­se­cured lend­ing over the next three months fell to -28.6, from -16.2.

That sig­nalled the steep­est con­trac­tion since the fourth quar­ter of 2008, when the econ­omy was in the depths of its worst post-war re­ces­sion.

The BoE has said there is no over­all debt bub­ble in Bri­tain but it has ex­pressed con­cern about con­sumer debt, which had been grow­ing at about 10% a year. The BoE has sig­nalled it is likely to raise in­ter­est rates for the first time in more than a decade soon, so long as the econ­omy and in­fla­tion con­tinue to grow.

Most economists polled by Reuters think it will hike rates in Novem­ber, al­though a ma­jor­ity said it would also be a mis­take, given the un­cer­tain out­look ahead of Bri­tain’s di­vorce from the EU.

Thurs­day’s sur­vey fig­ures showed Bri­tain’s con­sumer econ­omy is run­ning out of steam, said Joanna Davies, econ­o­mist at Fathom Con­sult­ing, the only fore­caster in re­cent Reuters polls to pre­dict a re­ces­sion. “We are quite con­cerned about the con­sumer squeeze,” Davies said, cit­ing fall­ing wages in in­fla­tion ad­justed terms and his­tor­i­cally low house­hold sav­ings.

Len­ders ex­pected the avail­abil­ity of mort­gages and loans to busi­nesses to re­main broadly steady over the next three months.

LEN­DERS EX­PECTED THE AVAIL­ABIL­ITY OF … LOANS TO BUSI­NESSES TO RE­MAIN STEADY OVER NEXT THREE MONTHS

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