Mortgage approvals hold firm in November, despite increased pressure on banks from Eurozone crisis - ITEM Club
Andrew Goodwin, senior economic advisor to the EY ITEM Club, comments on today’s lending figures:
- Some encouragement from approvals holding up despite increased pressure on banks from Eurozone crisis
- Credit conditions unlikely to loosen while outlook is so uncertain
- Demand for unsecured credit remains subdued because of wider consumer weakness
“We can derive some encouragement from mortgage approvals holding firm in November. By that stage, the escalation of the Eurozone crisis had begun to exert pressure on the banking system so we could easily have seen approvals slip back. The net lending figures are softer, but these can be notoriously volatile month-to-month and there was always a good chance that October’s surge would be followed by a weaker figure in November
“In general these figures continue the trend of the past six months or so - activity is gradually picking up, albeit at levels still well below historical norms. This is sufficient to keep house prices broadly stable.
“Tomorrow’s credit conditions survey will give us a better idea of how lending flows are likely to change in the short-term. As things stand we’re unlikely to see any further loosening of credit conditions, given the heightened level of uncertainty. But the previous survey had raised concerns about the potential for adverse wholesale funding conditions to restrict lending and any further escalation in the Eurozone crisis could easily set us along this path.
“On the unsecured side it’s a case of ‘more of the same’. Demand for unsecured credit is very weak because consumers are reluctant to spend, whether that is because of their financial situation or a wider lack of confidence.”