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Tuesday, 29 October, 2002, 10:16 GMT
UK shoppers build up record debt
Removal men carrying a washing machine
Mortgage lending saw strong growth last month
Low interest rates have helped consumers to rack up debt at a record rate, according to the latest figures from the Bank of England.


The figures certainly show no let-up in the consumer's appetite for borrowing

Philip Shaw, Investec
Total lending rose by 8.9bn in September, the strongest monthly rise since records began in 1993, and 13.1% higher than the same time last year.

Mortgage lending surged 6.9bn last month, with the 12.4% annual rate of increase also the highest since records began.

Consumer credit grew by 2bn, which was stronger than analysts had expected.

Housing boom

"The figures certainly show no let-up in the consumer's appetite for borrowing," said Philip Shaw, chief economist at Investec.

"There's been a sharp rebound in both the value of mortgage commitments and also the number of mortgages as well, which indicates that the UK housing market is still roaring away."

Recent house price surveys by the main mortgage lenders such as Halifax and Nationwide have shown house prices rising at an annual rate of more than 20%.

According to the Bank's figures there were 117,000 new mortgage approvals last month.

While this was below April's peak of 125,000, it was higher than the average of 111,000 in the three months to August.

'Encouraging' figures

Economists said the Bank of England's interest rate-setting body, the Monetary Policy Committee (MPC), would not be too concerned about the lending figures.

"As far as interest rates are concerned, I think the MPC will be encouraged by this data rather than worried about it because the rest of the economy remains pretty soft," said Ciaran Barr, chief UK economist at Deutsche Bank.

He added that the lending figures were only "part of the picture" and that the MPC would be more interested in what was happening in the manufacturing sector.

Earlier this month the MPC left UK interest rates unchanged at 4%, but minutes from the meeting showed that three of the nine committee members wanted to see rates cut to 3.75%.

See also:

13 Sep 02 | Business
02 Sep 02 | Business
29 Jul 02 | Business
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