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Firms still hold back as house lending rockets

January 22, 2014

MICHAEL BIRD

WHILE credit is rapidly flowing into the mortgage market, new figures from the Bank of England suggest that firms are still holding back from borrowing to grow. According to data released by the Council of Mortgage Lenders (CML) yesterday, gross lending for housing rocketed during 2013, up by 49 per cent in the 12 months to December, hitting 17bn last month, and 177bn for the year in total. According to the CML, last month was the strongest December for mortgage lending since 2007, before the financial crisis. Despite the rapid strengthening of the mortgage market, Bank of England figures also out yesterday show that lending to businesses is still struggling to gain traction. While gross lending to small and medium-sized business swelled 10 per cent during the first 11 months of 2013, compared with the same period in 2012, the net monthly flow of lending to UK businesses actually dropped by 3.7bn in November. Most analysts expect that the housing market will continue to strengthen in the year ahead, with prices rising way ahead of growth in incomes again this year. "We are still looking at a distorted market, with more fuel being pumped into certain areas than others. We will only be able to achieve sustainable growth once this external support has been withdrawn," said Peter Williams of the Intermediary Mortgage Lenders Association , commenting on the CML's figures. IHS Global Insight's chief UK economist Howard Archer said: "The decision of the Bank of England and the Treasury to end Funding for Lending support for lending to households from January looks a highly sensible decision." He added: "It is very important that the Bank has indicated that it is prepared to take further action to rein in the housing market if prices continue to rise markedly amid ongoing strengthening activity."


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Source: City A.M. (UK)


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