October 29, 2018 / 10:22 AM / 10 months ago

UPDATE 1-UK lending growth hits three-year low after car sales fall - BoE

 (Adds detail on mortgage lending, reaction)
    By David Milliken and Andy Bruce
    LONDON, Oct 29 (Reuters) - British consumer borrowing rose
at the slowest rate in more than three years last month after
new car sales fell by a fifth, the Bank of England said on
Monday, in news likely to raise concern about the economy's
    Consumer spending has been a major factor in the British
economy's somewhat faster-than-expected growth since June 2016's
Brexit vote, despite a jump in inflation that has eroded
household incomes.
    The BoE data showed that year-on-year growth in unsecured
consumer lending slowed to 7.7 percent in September from 8.2
percent in August, the weakest pace since June 2015. 
    And comparing the three months to September with the
previous three months, credit growth was the weakest since
January 2014, up just 5.5 percent on an annualised basis.
    "New borrowing for car finance fell sharply, consistent with
very weak car registration numbers in September, while other
borrowing, such as personal loans and overdrafts, was robust,"
the central bank said.
    Auto industry data earlier this month showed that British
new car registrations dropped by 20.5 percent on the year in
September, one of the key selling months because of a
twice-yearly change in licence plate numbers.
    While part of the decline reflects disruption as
environmental concern leads car buyers to turn away from diesel
vehicles, some surveys have also shown more general consumer
caution in the run-up to Brexit.
    "Even allowing for the impact of substantially weakened car
sales due to special factors, September's data reinforces the
impression that consumer are currently relatively cautious in
their borrowing while lenders have certainly become warier about
advancing unsecured credit," economist Howard Archer of
consultants EY ITEM Club said.
    The Bank of England said this month it expected consumer
credit growth to slow further in response to a tightening of
loan conditions by lenders earlier in the year.
    Finance minister Philip Hammond is expected to warn
lawmakers in his annual budget later on Monday that he will only
be able to ease off on austerity if they agree a deal to leave
the European Union in an orderly way in March.
    There was a little immediate market reaction to Monday's
lending data, which painted a slightly more positive picture of
the housing market.
    British house price growth has slowed this year, mostly due
to falling prices in much of central London, where demand has
been hit by higher purchase taxes on expensive homes and reduced
foreign investor appetite since 2016's Brexit vote.
    The number of mortgages approved for house purchase dropped
less than economists had expected in a Reuters poll, falling to
65,269 from 66,101 in August. Net mortgage lending beat
forecasts, rising by 3.9 billion pounds ($5 billion) versus a
forecast 3 billion-pound increase.
    Some analysts expect Hammond to open a consultation into
higher property purchase taxes for foreign buyers in Monday's
budget, on top of existing surcharges for second homes and
investment properties.

($1 = 0.7794 pounds)

 (Editing by Larry King)
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