LONDON (Reuters) - Lending to Britain’s consumers picked up unexpectedly in May and mortgage approvals fell less than forecast, Bank of England data showed on Tuesday.
However, the overall environment for consumer credit remains weak as the economy struggles with tight credit conditions and its second recession in four years, and net mortgage lending grew at its weakest pace since September last year.
These figures are therefore unlikely to shift economists’ expectations that the BoE will restart its programme of gilt purchases to stimulate the economy at its policy meeting on Thursday.
Britain’s consumers have been reluctant to take on more credit for major purchases as bank lending conditions are tight and uncertainty over jobs is weighing on sentiment, making weak consumption a major drag on the fragile economy.
Consumer credit rose by 732 million pounds in May, stronger than the 200 million increase forecast by economists and bouncing back from growth of just 379 million pounds in April.
And mortgage approvals for house purchase fell to 51,098 from 51,627, a smaller decline than economists had forecast.
But net mortgage lending, which lags approvals, rose by only 563 million pounds, the smallest increase since September 2011 and below the 800 million pound rise forecast.
The figures tally with the muted performance of Britain’s housing market, where prices have been broadly flat over the past 12 months, and which many economists predict will drift slightly lower over the coming year.
Before the 2008 financial crisis, monthly mortgage approvals ran at around 90,000, but the number of home sales has slumped since then and the property market has ceased to be a major driver of consumer spending.
Last week similar data from the British Bankers’ Association showed the number of mortgage approvals for house purchase fell to its lowest level in over a year in May.
The BoE’s preferred gauge of money supply, M4 excluding intermediate other financial corporations, fell 0.1 percent on the month after a 0.4 percent rise in April.
The central bank says money supply would have fallen much more sharply if it had not engaged in 325 billion pounds of gilt purchases, funded with newly created money, since March 2009.