Britons resume borrowing, rush to buy homes as economy reopens
LONDON (Reuters) – British consumers have started borrowing again and house prices have risen the most in more than 16 years, rising 13.4% a year, according to data which showed the economy was recovering from its pandemic slump.
Britain has reported one of the highest COVID-19 death rates in the world and its economy shrank almost 10% last year, but is expected to overtake even the United States in 2021, aided by a rapid vaccination program and huge incentives from the government and the Bank of England.
BoE figures released on Tuesday showed consumer borrowing increased in May for the first time since August – albeit modestly – as restrictions were lifted and consumers bought cars on loan deals. concession financing and taken out more personal loans.
Unsecured loans were up 280 million pounds ($ 387.66 million) net from April. Credit card borrowing has fallen.
The data also showed that households were still building up their bank accounts, but at a slower pace than at the start of the year.
Ruth Gregory, an economist at Capital Economics, said the numbers supported her forecast that the economy grew 1.5-2.0% in May, slowing slightly from April’s 2.3% jump, and was on track to regain its pre-pandemic size in the fall.
This would be slightly earlier than the BoE’s expectations at the end of 2021.
Last week, the central bank left its policy rate at an all-time low of 0.1% and did not change its plan to increase its government bond purchases to Â£ 895 billion.
Despite signs of an economic recovery, most of the BoE’s rate regulators have said they want to “lean heavily against downside risks to the outlook.”
THE BIGGEST HOUSEHOLD PRICE INCREASE SINCE 2004
Separately, on Tuesday, mortgage lender Nationwide said UK house prices had risen the most in annual terms since November 2004, as buyers rushed to take advantage of a tax break offered by Finance Minister Rishi Sunak.
âAlthough the strength is in part due to base effects, with June of last year exceptionally weak due to the first foreclosure, the market continues to show significant momentum,â said Nationwide Chief Economist Robert Gardner.
James Sproule, an economist at Handelsbanken, said he expected house prices to continue rising with affordability measures lower than their previous peak.
“Our larger expectation is that the economy will perform well over the coming year, and that is not a backdrop that will see house prices fall,” he said.
The BoE has said it is monitoring the housing market as it assesses the risk of a large rebound in inflation.
His data also suggests that Sunak’s incentive – which is to be phased out from July and ends in September – was helping fuel the housing boom, as well as demand for larger properties after lockdowns caused a surge. home work.
Net mortgage lending has grown faster than expected in a Reuters poll of economists, jumping Â£ 6.6bn in May from April, although lower than the record net increase of 11.4 billion pounds from March.
The BoE said mortgage approvals for home purchases stood at 87,500 in May, up slightly from April, although down from a peak of 103,200 in November 2020.
($ 1 = 0.7223 pounds)
Writing by William Schomberg; edited by Barbara Lewis