LONDON (Reuters) - British credit card lending suffered its biggest net fall in nearly six years in July, in a sign that households are reluctant to borrow more and casting doubt on any imminent rebound in consumer spending.
Bank of England figures on Thursday showed that net credit card lending fell by 147 million pounds, the biggest drop since August 2006, dragging overall unsecured consumer lending down by the largest margin since February this year.
The figures dampen hopes of a strong rebound in economic activity in July after nine months of recession, and contrast with official retail sales data that showed unexpectedly strong growth last month.
Mortgage approvals also remained weak, recovering slightly from June’s 18-month low and coming in around economists’ expectations at 47,312. But net mortgage lending was much higher than expected at 1.1 billion pounds, the biggest increase since January.
Nonetheless, the data back economists’ forecasts for British house prices to stay flat or fall slightly over the coming year. Mortgage lender Halifax reported a 0.6 percent annual fall in house prices for the three months to July.
July’s data is the last before the Bank’s new Funding for Lending Scheme takes effect from August 1. Under the scheme, banks get access to cheap funding on condition that they pass it on in lending to businesses and home-buyers.
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 a modest pick-up in the number of mortgage approvals in July after approvals on this measure sank to the lowest in 3-1/2 years in June, due partly to unusually wet weather and extra public holidays.
In one bright spot for the central bank, its preferred gauge of money supply, M4 excluding intermediate other financial corporations, rose at its fastest annual pace in more than three years. It grew by 3.9 percent, suggesting that the more than 325 billion pounds of quantitative easing asset purchases so far is having some impact on the money supply.
Reporting by David Milliken and Sven Egenter