UK Consumer Lending at its Slowest since March 2015

UK consumer lending rose to its slowest in almost four years in November and mortgage approvals hit a seven-month low, further supporting the possibility of a pre-Brexit slowdown in the economy.

Data released by the Bank of England (BoE) on Friday showed annual growth rate in unsecured consumer lending climbed 7.1 percent from 7.4 percent in October, marking the slowest growth since March 2015.

Figures for November alone showed a £924 million net gain in consumer lending, a tad short from economists’ average estimates.

Net gilt purchases by non-resident investors totaled £2.4 billion in November compared with a downwardly adjusted £5.0 billion in October and £8.6 billion in November 2017.

Brexit Anxiety Dragging Down UK Economy

The latest figure reinforced signs from several retailers that UK consumers have tightened their belts late last year due to the risk of the country pulling out from the European Union (EU) without a firm deal to ease the economic shock.

Still, the central bank said lending to British consumers could improve again once the situation is clearer.

Brexit plans of British Prime Minister Theresa May face a make-or-break vote in the week of January 14, around a couple of months before the UK is scheduled to end its membership of the EU.

Calls for a second referendum, which May has dismissed, are increasing.

Data from the country’s dominant services industry indicated only a 0.1 percent growth in the economy during the fourth quarter of 2018, compared with the last three months, as Brexit uncertainty builds up.

November and December were the weakest for morale among services companies, which account for a large part of the economy, since March 2009 – around the low point of UK’s last recession – the purchasing managers’ index (PMI) of a London-based global information provider indicated.

Economist James Smith stated that the latest UK services PMI provides further evidence that the economy has lost most, if not all, of the momentum it has last summer.

The BoE also reported that the number home-loan approvals fell more than expected in November to 63,728 from a revised lower 66,709 in October, the lowest since April.

The figure was below all forecasts in a survey conducted by a UK news agency.

The housing market faltered in the previous year, with major mortgage lenders posting price increase at a five-year low.

Actual mortgage lending, which tends to trail behind approvals, rose £3.5 billion ($4.4 billion) in November from £4.1 billion in October.

BoE Governor Mark Carney warned in December that house prices could decline 30 percent in the event the UK leaves the bloc without a deal, which is not the central bank’s base-case outcome.

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