-->Hallo!
Record borrowing points to UK rates rise
By Anna Fifield, Economics Reporter
Published: October 29 2003 11:14 | Last Updated: October 29 2003 11:14
The likelihood that interest rates will rise next week strengthened even further on Wednesday when the Bank of England confirmed that consumer borrowing soared to a new record in September.
Economists said the Bank's monetary policy committee was likely to act to curb this seemingly unfettered consumer demand by increasing rates to 3.75 per cent.
"The MPC is likely to sanction a quarter-point rate hike at its November meeting next week, with a further quarter-point to come in the first quarter of 2004, reversing the rate cuts made earlier on this year," said George Buckley of Deutsche Bank.
"This is new territory for the Bank, which will want to avoid a housing market/consumer crash at all costs."
The Bank said that total consumer lending rose by a record £10.7bn in September, up 14 per cent on the year. The rise was largely driven by mortages for new home buying, with mortgage lending up by £8.8bn, the highest increase on record. This was a sharp acceleration from the £1bn increase in August.
The increases are likely to be sustained in coming months as the figures also showed that mortgage approvals rose from 122,000 in August to 136,000 last month - the highest level since January 1999.
Furthermore, unsecured lending rose by £1.83bn. Of this, £765m of the increase was on credit cards.
John Butler of HSBC said:"That seems to cement a rate hike at next week's meeting and indeed will raise fears that rates may need to rise substantially before the consumer cools."
Mortgage lending causing main concerns
The official figures confirm reports from the Council of Mortgage Lenders and the British Bankers' Association that mortgage lending hit new record levels in September, adding to evidence that the housing market might be rallying.
The minutes of the MPC's meeting earlier this month showed that high levels of consumer debt are causing concern for some of the four members who voted for a rate rise this month.
They noted that the deceleration in house price inflation had apparently ground to a halt, and mortgage approvals hit a 10-year high in August.
Some members warned that"the continuing rapid build-up of household indebtedness risked...a larger and more abrupt increase in planned saving at some time in the future," according to the minutes.
Because of CML and BBA figures, Wednesday's data should not have come as much of a surprise, Mr Buckley said.
"As such, while these are notably stronger figures, they should perhaps not come as too much of a surprise. Structurally, the move to low inflation, demographic trends, increased home ownership, lack of housing supply and banking sector competition have all played a part in raising household debt," he said.
But the MPC and some economists alike are concerned that households might not have fully factored in the eventual rise in rates into their borrowing decisions.
"The MPC has a very difficult balancing act to perform, a situation they have been instrumental in creating," Mr Butler said.
"The dilemma is how to cool the consumer without a sharp correction. That is a difficult issue because we are moving into the unknown as the consumer has never been so indebted and, hence, will be more sensitive to rate changes than in the past."
Lenders accused of 'underhand tactics'
Meanwhile, a BBC programme to be broadcast on Wednesday night discovered that housebuyers were being encouraged to break the law in order to obtain huge mortgages.
<font color=#FF0000> Brokers, and even banking staff, have been telling buyers to lie about their incomes to get bigger and bigger loans, the BBC says, adding that these “underhand tactics” could also be the reason why house prices have gone on rising for so long.</font>
Birmingham Midshires, the mortgage lender owned by HBOS, Britain's largest lender, on Monday suspended three mortgage advisers while it investigated allegations that customers had been encouraged to exaggerate their salaries on application forms, the BBC reported on its website.
The BBC's Money Programme will also make similar allegations about advisers at or recommended by several of the country's biggest estate agent groups.
Eigene Meinung:
Ich darf daran erinnern dass der aktiencrash im 29er Jahr an der WallStreet auch durch die Zinserhöhung der Bank of England mitverursacht wurde.
Gruss
Otto
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