Mortgage approvals rise as economists warn of 'eerie memories of credit binge'


The number of mortgage approvals being made to home buyers reached its highest levels in nearly a year in January, Bank of England figures show.

Some 69,928 loans were approved for house purchase in January, marking the highest figure seen since February 2016.

Meanwhile, non-mortgage lending increased by 10.3% over the previous 12 months, slightly down on a 10.6% annual increase recorded in December.

Consumer credit recorded a net £1.4 billion increase in January, compared with an average £1.6 billion increase over the previous six months.

Within the £1.4 billion increase, lending using personal loan and overdrafts increased by £1.1 billion while credit card lending increased by £339 million.

Concerns have been raised in recent months that some borrowers may be at risk of over-stretching themselves as households are squeezed by rising living costs.

Kay Daniel Neufeld, an economist at the Centre for Economics and Business Research (Cebr) said: "The growth in consumer credit has accelerated at a worryingly high pace over the past six months.

"This growth has been driven by consumers' appetite to spend throughout much of 2016.

"While strong domestic demand and retail spending growth were welcome pillars of economic growth, especially in the wake of the EU referendum, the increasing indebtedness of UK households and the reliance on cheap credit have evoked eerie memories of the credit binge days before the financial crisis."

Howard Archer, an economist at IHS Markit, said the underlying slowdown in the growth in consumer credit seen in January suggests consumers are now becoming more cautious about borrowing and spending.

He said: "It looks inevitable that the fundamentals for consumers will progressively weaken over the coming months with inflation rising markedly due to the weakened pound and companies likely increasingly looking to hold down pay to limit their total costs."

Peter Tutton, head of policy at StepChange Debt Charity, said: "When borrowing rises more quickly than wages, it can leave more households exposed to persistent debt.

"We are currently experiencing record demand for our services and as households take on more debt, it could greatly increase their vulnerability.

"Responsible lending is still critically important and the need for better protections for people who do fall into difficulty continues to increase."