LONDON (Reuters) - Bank of England lending data showed softening consumer demand on Monday, after mortgage approvals fell to a nine-month low in June and previous red-hot growth in unsecured borrowing eased to its weakest in over a year.
Though business lending was more upbeat, the figures are likely to boost the argument of those BoE policymakers meeting this week who say there is no rush to raise interest rates, despite above-target inflation and record employment.
British lenders approved the fewest mortgages for house purchase since last September, with the number dropping to 64,684 from May’s 65,109 - slightly lower than economists’ average expectation of 65,000 in a Reuters poll.
Three months ago, the BoE forecast that monthly mortgage approvals would rebound to 71,000 a month.
“Against a backdrop of political and economic uncertainty, house purchases have hit a plateau,” said Alastair McKee, managing director of mortgage brokers One 77 Mortgages.
While Britain weathered the immediate aftermath of last year’s Brexit vote far better than most economists had forecast, growth so far this year has been the weakest since 2012.
Unsecured consumer borrowing resumed its slowing trend after an unexpected pick-up in May, something which should reassure the BoE after one of its top regulators warned that banks might be getting complacent over credit risks.
“Banks have started responding to this changing environment by reducing the availability of unsecured credit and are expected to tighten further ... citing changing appetite for risk and a worsening economic outlook,” said Fabrice Montagne, an economist at Barclays.
Compared with a year ago, unsecured lending in June was up 10.0 percent - still a rapid expansion, but the slowest growth since May 2016 and moving away from the 11-year high of 10.9 percent reached in November 2016.
Most economists polled by Reuters expect the BoE to vote to keep rates on hold at their record low 0.25 percent on Thursday.
But at least two policymakers are likely to vote to reverse last year’s emergency rate-cut post-Brexit.
While headline rates of economic growth are currently below average, they expect stronger exports and business investment to soon compensate for weakness in consumer demand caused by slow wage growth and the higher inflation since the Brexit vote.
Monday’s data suggest that businesses’ appetite for credit has remained solid, as the boon to exporters from a weaker pound outweighs longer-term uncertainty about Britain’s ease of access to European Union markets after it leaves in March 2019.
Gross lending to non-financial businesses rose by a record amount, while net lending to large firms rose by 3.9 percent compared with a year earlier, unchanged from May and one of the biggest increases in the past five years.
“It is impossible to tell, however, if the pickup ... reflects plans to invest more or firms responding to speculation that interest rates might rise soon by bringing forward planned borrowing,” said Samuel Tombs of Pantheon Macroeconomics.
editing by John Stonestreet