The Bank of England (BoE) figures reveal that British credit card lending fell by £147 million, the lowest in six years, as households seem reluctant to borrow, casting a dull spell on consumer spending.
Mortgage approvals remained low, doing slightly better from June’s 18-month low and reaching economists’ expectations at 47,312. Net mortgage lending at £1.1billion saw the biggest increase since January.
The recently launched Funding For Lending scheme by the government 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.
According to the Council of Mortgage Lenders the average deposit being put down by house buyers is 20%, pricing many out of the market. Samuel Tombs, UK Economist at Capital Economics, credit might become easier to obtain now the Funding for Lending Scheme was up and running.
“That said, the scheme has not prevented some lenders from increasing their borrowing rates recently. Indeed, we think that weak money and credit growth is likely to act as a brake on the economy for some time to come”, he said.
The Bank of England’s figures reflect those from the Land Registry, which show housing transactions have become fewer than 50,000 a month, with a fall of 60% compared to the highs of 2007. BoE’s figures also showed consumer credit remained bleak, contracting by £0.2 billion, compared with a forecast increase of £0.5 billion.