Homes Borrow Least Money In 15 Years

(Reuters) – FINANCIAL INSTITUTIONS lent less money to households last month than at any time in the past 15 years, overshadowing a modest rise in mortgage approvals, official data showed today.

More doubt was cast on the effectiveness of the Bank of England’s quantitative easing policy, which aims to combat a shortage of cash caused by the credit crunch, after headline M4 money supply suffered its biggest drop since September 2004.

‘The Bank of England has repeatedly stressed recently that it will take time for quantitative easing… to fully feed through to support bank lending. There continues to be little hard evidence of this so far, which is potentially worrying for recovery prospects if the situation persists,’ said Howard Archer, chief UK economist at IHS Global Insight.

Net lending rose by £414 million in June, down from a £485 million increase in May, barely a ninth of last June’s rise after both new consumer credit and mortgage lending were much less than economists had expected.

This was the weakest figure since the Bank began collecting this data in April 1993.

New unsecured consumer credit slumped to £71 million confounding economists’ forecasts of a £300 million rise and also less than half a net £153 million in May, also revised sharply downwards.

Net new mortgage lending edged up to £343 million from £331 million, again far less than the £600 million in net lending that economists had expected.