Latest lending figures distorted by extra bank holidays in June – ITEM Club
Nida Ali, economic advisor to the EY ITEM Club, comments on today’s lending figures:
- Latest lending figures are not seasonally adjusted and are distorted by the two extra Bank holidays in June, making the data look worse than it is
- Nevertheless the wider economy suggests that the underlying picture for the housing market is weak
- Recent policies announced by the Bank of England may go some way in improving the situation, but we still expect house prices to decline over the coming months
“Today’s lending figures haven’t been seasonally adjusted and are distorted by the two extra Bank holidays in June, which makes the data look worse than it is. It’s difficult to judge the monthly movement of the housing market from May to June based on these figures.
“Nevertheless, it is clear from the wider economy that the underlying picture for the housing market remains very weak. According to the latest Credit Conditions Survey, banks expect credit availability, especially to households with high loan-to-value ratios, to decline in the next few months. The survey also reported that banks are facing high borrowing costs, which are being passed through to the cost of secured household lending. So credit conditions are very tight. Meanwhile, low consumer confidence and high levels of household debt will continue to deter households from taking our mortgages.
“Recent policies announced by the Bank of England - such as additional QE and the Funding for Lending Scheme, aimed at increasing the flow of credit in the economy - may go some way in improving the situation. However, we still expect house prices to keep declining over the coming months with a recovery only expected in 2013.”