UK Personal Credit Increases
The Bank of England (BoE) is offering some updates to the liquidity in the economy this morning in the form of money supply and lending figures. The M4, or Broad Money Supply contracted marginally during the month of May by -0.9% compared to a -0.6% contraction experienced in April when measured year on year. The month on month Broad Money Supply metric also shrunk, an -0.1% drop was experienced in May in comparison to April’s -0.2% contraction.
Consumer Credit grew during the month according to the BoE, May say £0.74Bn in new credit being taken out compared to the revised April figure of £0.653Bn, markets had expected this expansion to be closer to £0.70Bn for May. In keeping with this expansionary credit trend the Net Lending To Individuals number also grew on the month, this is showing an additional £2.7Bn in borrowings compared to just £2.4Bn in April.
May’s Mortgage Approvals fell very slightly compared to April, this statistic came in at 61.707k approvals in contrast to the previous reading of 62.806k, the market consensus was for a reading of 61.600k for the month.
The Bank of England will be closely monitoring the mortgage application figures going forward, particularly in light of the action taken by their Financial Policy Committee (FPC) last week in an attempt to cool house price growth. Commentators are speculating as to whether the proposed policy from the FPC to restrict mortgage sizes goes far enough to have a meaningful effect. This proposed policy is aimed at the high end of the housing market in an effort to dampen London prices while leaving breathing room in the rest of the country, which is experiencing much more moderate house price expansion. Since the policy doesn’t come into effect until September it will be important to watch the mortgage applications over the next few months, ahead of a restrictive policy such as this it would be expected that mortgage applications rise as individuals and banks attempt to get business done ahead of the restriction coming into effect.
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