Net lending to Britons in July fell at its sharpest pace since records began in 1993, even as the number of mortgages approved rose to its highest since April 2008, Bank of England figures showed today.
The figures suggest that many Britons are choosing to pay down their debt as the economic downturn persists, and that banks remain wary about extending new lending, despite the BoE's unprecedented efforts to get cash flowing around the economy.
The number of mortgage approved for home purchase rose to 50,123 in July from 47,891 in June - slightly below analysts' forecasts of 51,000 and well below the levels seen before the onset of the credit crunch two years ago.
"The mortgage approvals are in line with expectations but are still running at a level which is likely to constrain demand for housing," said Stephen Lewis, economist at Monument Securitie.
"The overall figures for net lending for households show the extent to which reining in credit at the moment - a very weak number," he added.
The pound hit a day's low against the euro and gilt futures rose to a session high after the data, which came hot on the heels of a weaker-than-expected manufacturing survey -suggesting recovery may be further away than some economists thought.
The BoE expanded its quantitative easing programme by £50 billion to £175 billion in August, after concerns that too much money was still tied up in the financial sector.
BoE figures also released today showed M4 money supply growth accelerated in July by 1.5 per cent its fastest pace since January.
But BoE policymakers' preferred money supply gauge - M4 excluding intermediate other financial corporations - suggested the pick-up in money supply may not be filtering through to businesses and households that quickly, rising by 0.6 per cent on the month, according to a new monthly series.
Reuters