Households' appetite to borrow set to come under pressure in 2017 - EY ITEM Club comments

31 January 2017

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  • December’s household borrowing numbers present a mixed-bag…
  • …with mortgage lending strong but consumer credit falling back sharply
  • This year is likely to see households’ appetite to borrow soften

Martin Beck, senior economic advisor to the EY ITEM Club, comments:

“Following November’s strong outturn for net unsecured lending, December saw lending record the softest outturn for nineteen months. However, we think it unlikely that this represents the start of a steep downturn, although demand for unsecured lending is likely to ebb this year, as household finances come under increasing pressure.

“The data on mortgage lending was firmer, with approvals edging up from 67,461 to 67,898 and net lending accelerating from £3.1b in November to £3.8b in December. Although lending flows were surprisingly firm in December, the bigger picture is one of the housing market largely treading water, with activity pretty flat over the past 2-3 years, once distortions caused by the changes to stamp duty are excluded.

“As with unsecured lending, we would expect mortgage activity to come under pressure in 2017, as higher inflation and a less supportive labour market squeeze household spending power and restrain consumers’ appetite to borrow.”