(Adds detail and analyst reaction)
By David Milliken
LONDON Feb 24 British banks approved the most
mortgages in a year last month and consumer borrowing saw some
of its fastest growth of the past decade, industry data showed
on Friday, contrasting with earlier signs of slowing momentum.
Strong consumer demand has driven Britain's economy since
June's Brexit vote, but in the past couple of months retail
sales have dipped and house price growth has been slowing, as
higher inflation gnaws at Britons' disposable income.
Friday's figures from the British Bankers' Association,
however, suggest there is still some residual momentum in the
property market, and a continued willingness of households to
The BBA said its members gave the green light to 44,657
mortgages in January, up from 43,581 in December and the highest
number since January last year, when 45,794 were granted.
Unsecured consumer borrowing grew at an annual rate of 6.7
percent - a figure that has only been beaten twice in the past
10 years, in September and October 2016 - bolstered by the
fastest growth in personal loans and overdrafts in a decade.
The Bank of England forecasts household incomes will cease
growing in inflation-adjusted terms later this year, and says it
will keep a close eye on the extent to which households will
seek to bridge the gap by borrowing more.
The BBA also reported a strong appetite from existing
home-owners to take advantage of low interest rates and
refinance their mortgages.
The boost in new mortgage lending comes as most economists
expect house price growth to slow to around 2-3 percent a year
this year and next, from around 7 percent in 2016, according to
a Reuters poll this week.
"Markedly weakening consumer fundamentals, likely mounting
caution over making major spending decisions, and elevated house
price to earnings ratios are likely to weigh down on house
prices," said IHS Markit economist Howard Archer.
But a chronic housing shortage meant outright price falls
were unlikely, he added.
Sterling's fall of more than 15 percent against the U.S.
dollar since June's referendum, as well as a big rise in oil
prices, is already pushing up prices in stores. The BoE
forecasts inflation will rise to 2.7 percent this year from 1.8
percent at the end of 2016.
The BBA data does not cover lending by mutually-owned
building societies, who are major players in the mortgage
market, and the BoE will publish more comprehensive data on
mortgage lending and consumer borrowing on March 1.
(Reporting by David Milliken, editing by Andy Bruce and Toby