INSTANT VIEW - Net consumer credit contracts at record pace

LONDON (Reuters) - British consumers repaid the highest amount of unsecured credit on record in October, paying down debt at twice the rate economists had expected, Bank of England data showed on Monday.

Separately, the figures showed that the number of mortgages approved rose slightly as expected, as did net mortgage lending.

ANALYST COMMENTS

VICKY REDWOOD, CAPITAL ECONOMICS

"While housing market activity is still improving (very modestly), broad money growth remains disappointingly weak. The number of mortgage approvals for new house purchase edged up and has been rising for a year now. But the rises have been so modest that approvals are still below the levels of 75k to 80k that in the past have been consistent with rising house prices.

"Meanwhile, consumer credit -- the area of lending where anecdotally credit conditions are still tightest -- fell by 0.6 billion pounds, the most since 1993. And, as happened last month, the strong (1.6 percent) monthly rise in the money supply in October turns out to have been driven solely by the financial sector, with little positive implications for real economic activity.

"Indeed, the MPC's preferred measure of the money supply (M4 excl. intermediate financial companies) fell by 0.7 percent month-on-month, following a similar drop in September. A strong economic recovery does not look likely when this measure of money is still falling, let alone rising at the 6 percent to 9 percent annual rates the MPC is looking for."

COLIN ELLIS, DAIWA SECURITIES

"At face value, these numbers are pretty disappointing. And with consumer credit falling 0.6 billion pounds in October - the weakest reading since this series started in 1993 - and mortgage approvals only inching higher to 57.3K, from 56.2K in September, there were little grounds for festive cheer in today's figures.

"However, the sectoral breakdown of the money data was as bad as it could have been, with household and PNFCs' M4 and M4 lending either up a little or flat on the month. But with even these annual growth rates still well below the 6%-9% range that BoE Governor King has previously highlighted, today's data are a clear signal that MPC member Posen was spot on last week - the MPC needs to have a Plan B up its sleeve, just in case its expected strong recovery doesn't materialise next year."

ROSS WALKER, RBS

"There's a very modest underlying pick-up in activity: mortgage approvals are edging up but still well down on their historical averages. When you look at the cash data, there's a trickle of new money coming in to the market. It just has a feel that there's some underlying stabilisation but it's still fairly fragile. I don't think there's much sense there's either any great demand for or supply of mortgage lending.

"There was another big drop in M4 excluding intermediate OFCs. The headline numbers might seem quite buoyant but on the more meaningful measures -- stripping out the OFCs -- the underlying position looks quite weak. There's not much evidence that QE is boosting those real economy money and credit aggregates. If it is working, it's through financial sector channels rather than through households and non-financial corporates."

DAVID PAGE, INVESTEC

"Approvals continue to inch higher, suggesting there is some improvement in underlying activity, but levels remain very depressed. In terms of lending, that's slightly disappointing, but we suspect that lending will pick up in coming months in line with approvals."