- A rebound in gross unsecured lending in January offered further backing to the idea that the economic impact from Omicron was modest and short-lived. But while consumer demand has quickly recovered from Omicron, the intensifying squeeze on household finances is likely to represent a more challenging obstacle.
- After the significant volatility of the past two years, the housing market has entered a calmer period. Activity is a little above pre-pandemic levels, but affordability pressures are likely to prevent a further pickup.
Martin Beck, chief economic advisor to the EY ITEM Club, says:
“Net unsecured lending slowed to just £0.6bn in January, the lowest level in four months. But this was due to a spike in repayments, and gross lending rebounded close to November’s level. This echoed the recovery flagged by timelier Bank of England data on credit and debit card spending and appears to offer further backing to the idea that the impact on activity from the Omicron variant was both modest and short-lived.
“But the intensifying squeeze on household finances is likely to present a more serious impediment to the economy, and the situation is likely to worsen in the short-term, with further rises in food, petrol and energy prices looking likely.
“The past two years have seen significant volatility in the housing market, caused by lockdowns and the stamp duty holiday. But we now seem to have entered a calmer period. Both mortgage approvals of 73,992 in January and net mortgage lending of £5.9bn in the same month are sitting at levels a little above those seen prior to the pandemic, but are still well below longer-term averages. While rising interest rates are unlikely to be a major challenge to the market, given the relatively low share of variable-rate mortgage debt, stretched affordability means activity might not pick up much further in the near-term.”