U.K. Consumer Loan Growth Hits Decade High After Brexit

Updated on
  • Consumer credit rises, but mortgage approvals decline
  • BBA says too early for full analysis of referendum impact

U.K. consumer credit rose the fastest in almost a decade in July, as shoppers hit the stores for summer goods and took advantage of low interest rates on loans.

The British Bankers’ Association said credit rose 6.4 percent compared with a year earlier, up from 6.3 percent in June and the quickest pace since December 2006. Business lending climbed 2.6 percent, the most since early 2015.

The weak spot was housing, where the number of mortgage approvals for house purchase fell about an annual 19 percent in July to 37,662. That tallies with surveys showing both property demand and sales fell. In the year so far, approvals are up 2 percent.

BBA Chief Economist Rebecca Harding said the data don’t currently suggest borrowing patterns have been significantly affected by the vote to quit the European Union. She added that it’s “still early days” and many borrowing decisions will have been made before the referendum.

“We suspect that the fundamentals for consumers will become less favorable over the coming months with purchasing power likely diminishing and the labor market softening,” said Howard Archer, an economist at IHS Markit in London.

U.K. retail sales jumped 1.4 percent in July, as warmer weather lifted sales of clothing and footwear and a drop in the pound encouraged tourists to snap up watches and jewelry. While those data were encouraging, Bank of America Merrill Lynch said it may not properly reflect consumer anxiety about the fallout from Brexit on the economy and their personal finances.

“Short-term Brexit fallout comes from uncertainty delaying big-ticket purchases: retail sales are not a great measure of that,” economist Rob Wood said in a report. “However, investment intentions and private car registrations are down and the housing market looks weak. A growth slowdown is under way, but not in day-to-day consumption.”

(An earlier version of this story corrected the month of the data in the first paragraph.)

(Updates with comment from economist in fifth paragraph.)
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