Weak lending figures point to slow recovery

By Sumeet Desai and Matt Falloon

LONDON (Reuters) - Mortgage lending rose by its lowest amount on record in May and measures of the growth of money in the economy remained weak, official data showed on Monday, in a sign economic recovery may take some time.

Money supply figures from the Bank of England showed its unprecedented 125 billion pound asset-buying programme may still not yet be having a significant impact on credit flows -- a key risk to the economy's chances of rebounding out of recession.

The BoE said mortgage lending rose by just 324 million pounds in May, a third of the increase in April and a tenth of that a year ago. It was the weakest increase since comparable records began in April 1993.

Mortgage approvals -- loans agreed but not yet made -- numbered 43,414 in May, just up from 43,191 in April, weaker than analysts' forecasts for a reading of 46,000 and pointing to further house price falls ahead.

"Disappointing," said Philip Shaw, chief economist at Investec. "It's a reminder that the economy in general is still very sensitive to developments in the financial system and highly dependent on credit."

There have been signs that the economy is already emerging from a steep recession but economists and policymakers alike have cautioned that any recovery could be slow and uneven because banks are still unwilling to pump loans into the economy.

The annual fall in house prices in England and Wales slowed for a third consecutive month in June, according to property data company Hometrack, but prices were still 8.7 percent lower than a year ago.

EARLY SIGNS