British consumer and mortgage lending rose faster than expected in January, though mortgage approvals dipped due to tax changes and poor weather, Bank of England figures showed on Monday.
The central bank said that consumer credit posted its biggest rise since November 2008, rising by 500 million pounds in January after an upwardly revised increase of 265 million pounds in December.
This was well above analysts' forecasts for a net repayment of 100 million pounds — a pattern repeated with mortgage lending which rose by 1.529 billion pounds, almost double forecasts of a 0.8 billion pound increase. Total lending rose by the biggest amount since July 2008, up 2.029 billion pounds on the month.
Mortgage approvals, however, fell to 48,198 from 58,233 — a slightly bigger drop than the fall to 50,000 that economists had forecast, pushing sterling to a one-and-a-half month low versus the euro <EURGBP=>.
For a graphic on the data see: http://graphics.thomsonreuters.com/310/UK_CCML0310.gif
The BoE's Trends in Lending survey last month had pointed to a fall in approvals in January after several months of rises.
Monetary Policy Committee member Kate Barker said last week that past months' buoyancy in house prices and mortgage approvals may in part have been due to a temporary stamp duty exemption which expired on Dec. 31.
"It is no surprise to see a sharp fall in mortgage approvals," said Philip Shaw, economist at Investec. "The key question is whether this is a temporary, weather-related dip or the start of a longer-term decline."
BAD WEATHER BLIP?
House prices are up 10 percent from a five-year low set early in 2009, but the most recent Nationwide Building Society survey showed a 1.0 percent fall in prices in February, the first decline in nine months, reinforcing concerns about the sustainability of the recent upturn.
Britain suffered unusually severe winter weather in January and early February, which had already shown up in poor retail sales for the month.
Despite the fall in sterling, many economists put at least as much weight on the upbeat consumer and mortgage lending figures as the decline in mortgage approvals.
"It's sort of six of one and half a dozen of the other. The increase in overall credit and mortgage lending is encouraging to some extent," said Marc Ostwald, fixed income strategist at Monument Securities.
Separate figures showed the BoE's preferred money supply gauge — M4 excluding intermediate other financial corporations — was flat on the month, an improvement on December's 0.5 percent decline.
However, the headline rate of M4 growth remains at historically weak levels, with a 4.9 percent year-on-year increase which was the lowest since February 2000.
The Bank of England's 200 billion pound quantitative easing policy has been largely aimed at supporting money supply growth through Britain's deepest recession in over 50 years, and the BoE has said money supply growth would probably have been much weaker without it.
