Jan. 31 (Bloomberg) -- U.K. mortgage approvals rose less than economists forecast in December and consumer credit fell the most on record as economic uncertainty amid the euro-area debt crisis undermined household confidence.
Lenders granted 52,939 loans to buy homes, compared with a revised 52,628 the previous month, the Bank of England said today in London. Economists forecast that approvals would gain to 54,000 from an initially reported 52,854 in November, based on the median forecast of 17 economists in Bloomberg News survey. Net consumer credit dropped by 377 million pounds ($594 million), the most since the monthly data began in 1993.
The U.K. economy shrank 0.2 percent in the fourth quarter, leaving Britain on the brink of another recession, and Bank of England Governor Mervyn King said last week policy makers can increase stimulus if needed to guard against a “renewed severe downturn.” British house prices may remain under pressure in 2012 as the weak recovery and rising unemployment curtail consumer demand.
“Despite the recent modest rise in mortgage approvals, housing market activity remains very low compared to long term norms,” Howard Archer, an economist at IHS Global Insight in London, said before the release. “It is likely to be remain pressurized in the early months of 2012 at least by weakened economic activity, rising unemployment and muted wage growth.”
While the mortgage approvals total is the highest in two years, it’s still about half the monthly average in the decade to 2007, before the financial crisis struck.
Net mortgage lending rose by 740 million pounds in December from November, the central bank said. Within the consumer borrowing category, net lending on credit cards fell 16 million pounds, the most in four months. Other loans, such as overdrafts and personal loans, declined 361 million pounds, the most since January 2011.
U.K. house prices were unchanged in January, property researcher Hometrack Ltd. said yesterday, adding that “downward pressure” on prices will continue.
A separate report today by GfK NOP Ltd. showed U.K. consumer confidence rose to the highest in seven months in January as slowing inflation eased pressure on shoppers. GfK said the increase should be treated “with caution.”
The Bank of England data also showed that M4 money supply fell 1.4 percent in December from November, the biggest decline since 1982, and was down 2.5 percent from a year earlier.
A measure of M4 money-supply growth the bank uses to assess the effectiveness of its asset purchases fell 0.8 percent in the three months through December on an annualized basis. That compares with a 3.2 percent increase in the three months through November. The gauge excludes financial companies that specialize in intermediating between banks, such as holding companies and non-bank credit grantors.
While Bank of England policy makers voted unanimously to keep the target for bond purchases at 275 billion pounds this month, some officials said more stimulus is “likely.” The central bank’s current program of so-called quantitative easing is due to be completed early next month. It also held its benchmark interest rate at a record low of 0.5 percent.
--With assistance from Mark Evans in London. Editor: Fergal O’Brien
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