Fears of recovery driven by household borrowing binge continue to look misplaced - EY ITEM

31 March 2014

  • Share
  • Continued modest growth in household borrowing…
  • …along with a surprise fall in mortgage approvals…
  • …points to the economic recovery continuing to be a relatively ‘creditless’ one

Martin Beck senior economic adviser to the EY ITEM Club, comments on February’s household borrowing numbers:

“Growth in household borrowing remained subdued in February. In level terms, household borrowing was only slightly up on January’s number. And although annual borrowing growth rose slightly, it remained well below likely growth in cash GDP, suggesting that the burden of household debt continues to decline.

“Meanwhile, the rapid revival in the housing market has still yet to be reflected in the level of net mortgage lending. While gross mortgage lending was at its highest level since mid-2008, mortgage repayments also rose, leaving only a modest rise in net lending for home purchases. What’s more, monthly mortgage approvals actually fell by the sharpest amount in two years, to their lowest level since last October.

“The fall in approvals suggests that a surge in mortgage lending over the next few months is unlikely. And the implementation of the Mortgage Market Review from next month, which imposes tougher lending criteria, may also constrain lenders’ appetite to provide credit. Overall, fears that that the economic recovery is being driven by a household borrowing binge continue to look misplaced.”