The latest figures released by the Bank of England show that the number of loans and lending approved for households jumped in September, which can be interpreted as an increase in confidence among not just lenders, but among the consumers who decide to take out these loans as well.
There isn’t just one sector that has risen either, with mortgage lending, credit card lending and approved loans and overdrafts all seeing big increases. It’s resulted in a total of £1.7billion being lent out to households during September, which could fuel a real economic recovery as consumer spending increases, especially in the housing market.
However, business lending has failed to achieve the same increase, and business were in fact lent £900million less than in the previous month.
Many are attributing the rise in approved mortgages to the Funding for Lending Scheme that was launched by the Bank of England last month, but this doesn’t explain the increase in credit card, overdraft or normal loan debt. The rises of the latter three may not indicate a responsible system of lending at all, as we have already seen big jumps in them when families have needed to borrow money to make up for an increasing gap in their incomings and outgoings during the recession.
Even with the apparent good news from the mortgage sector, there are still some people who are sceptical about September’s jump, such as Matthew Pointon, a property economist at Capital Economics: “The FLS has had some success in bringing down mortgage rates, and this can only be positive for mortgage lending. But we will need to see a larger drop in the cost of borrowing, alongside a significant relaxation of deposit requirements, before the mortgage market shows any real signs of life.”
If the increase in mortgages continues through October, then the Bank might find fewer people arguing that its Funding for Lending scheme isn’t the reason, but until then the arguments will continue.