UK consumer credit growth highest since 2005

[LONDON] British consumer credit expanded at the fastest annual pace since 2005 in May and lenders approved more mortgages than expected ahead of the EU membership referendum, Bank of England data showed on Wednesday.

Mortgage approvals for house purchases numbered 67,042 in May, up from 66,205 in April. Analysts in a Reuters poll had forecast 65,250 mortgage approvals were made in May.

Consumer credit rose 9.9 per cent compared with a year ago, the biggest annual increase since November 2005 and up from 9.6 per cent in April.

Overall, the figures suggested British lending was robust the month before Britons voted to leave the European Union, a result that has shocked financial markets and cast a pall over the outlook for the economy.

Sterling plunged against the dollar to its lowest since 1985 after the vote, and two ratings agencies downgraded Britain's sovereign credit rating late on Monday.

Finance minister George Osborne had predicted a cooling of the housing market, a cornerstone of Britons' wealth, if Britain left the EU.

Less comprehensive figures from the British Bankers' Association also pointed to a rise in the number of mortgages during May.

The number of approvals rose throughout most of 2015, following a slowdown the previous year when tougher checks on mortgage borrowers were introduced.

Net mortgage lending, which lags approvals, rose 2.824 billion pounds in May, the BoE said, more than a forecast of 2.2 billion pounds in the Reuters poll.

The BoE said consumer credit grew by 1.503 billion pounds. Economists had expected an increase of 1.4 billion pounds.

Britain's economic recovery is still heavily reliant on spending by households many of which have been buoyed by strong growth in the value of their homes.

The BoE said lending to non-financial businesses increased by 2.814 billion pounds, compared with a 176 million pound drop in April.

REUTERS