Rising house prices and increasing consumer confidence had driven mortgage lending to a seven-year high, causing a new dilemma for policymakers.
Banks handed out more money through loans and overdrafts in October than they had in almost a decade, The Times reports. The governor of the Bank of England Mark Carney recently sounded a warning on the level of household debt, while his chief economist, Andy Haldane, indicated that the central bank might intervene to quell demand.
These sentiments will be fuelled by the news that gross mortgage lending jumped to £12.9bn in October — 26 per cent up on a year ago and the highest level since August 2008. The number of loans for house purchases rose from 44,825 in September to 45,437 in October – a rise of 21 per cent.
Meanwhile, net lending for personal loans and overdrafts rose by £228m in October, the largest monthly rise since 2006. Net borrowing through personal loans has been growing at an annual rate of about 5 per cent over the past 12 months. Completing the picture, net borrowing by businesses rose by £600m in October, after falling by £1bn in September.
The mortgage data comes from the British Banking Association, whose chief economist Richard Woolhouse, said: “These statistics show that housing market activity remained strong in October. Consumers remain confident and their incomes are growing. Mortgage rates are at multi-year lows and people are snapping up the very competitive deals being offered by banks.”
Hinting at the nature of a future BOE intervention on wider borrowing, Andy Haldane said this week: “Unsecured debt — by which I mean not so much credit card debt as personal loans — is picking up at a rate of knots. We’ve seen the cost of those loans fall very significantly over the course of the last year or two. That would be ultimately an issue that the financial policy committee might want to look at pretty closely, and I’m sure it will.”
Source : http://www.theweek.co.uk/