October 12, 2017 / 11:09 AM / 10 months ago

UPDATE 1-UK lenders plan biggest consumer lending curb since late 2008 -BoE

 (Adds reaction, regulator comments)
    By Andy Bruce and Huw Jones
    LONDON, Oct 12 (Reuters) - British lenders are planning the
biggest cutback in consumer loans in nearly 10 years, the Bank
of England said on Thursday, after it warned repeatedly about
the strong pace of lending to households.
    The BoE's quarterly net balance of lenders' expectations for
the availability of unsecured lending over the next three months
fell to -28.6 from -16.2.
    That signalled the steepest contraction since the fourth
quarter of 2008, when the economy was in the depths of its worst
post-war recession.
    The BoE has said there is no overall debt bubble in Britain
but it has expressed concern about consumer debt, which had been
growing at about 10 percent a year. 
    The BoE has signalled it is likely to raise interest rates
for the first time in more than a decade soon, so long as the
economy and inflation continue to grow.
    Most economists polled by Reuters think it will hike rates
in November, although a majority reckon it would also be a
mistake given the uncertain outlook ahead of Britain's divorce
from the European Union.
    Thursday's survey figures showed Britain's consumer economy
is running out of steam, said Joanna Davies, economist at Fathom
Consulting, the only forecaster in recent Reuters polls to
predict a recession.            
    "We're quite concerned about the consumer squeeze," Davies
said, citing falling wages in inflation adjusted terms and
historically low household savings.
    "If you add tightening credit conditions onto that, it
doesn't bode well."   
    Lenders expected the availability of mortgages and loans to
businesses to remain broadly steady over the next three months.
    But they also expected demand for loans for capital
investment in businesses to fall at the fastest rate since the
third quarter of 2011.
    The BoE has raised concerns about heady growth rates in
consumer credit, and the Financial Conduct Authority, which
regulates consumer credit firms, is looking at whether changes
are needed as thousands of people struggle with debt.
    Earlier this year the BoE warned lenders may be dicing with
a "spiral of complacency", with car loans a particular area of
    The FCA faces some political pressure to cap high interest
rates, but David Geale, director of policy at the watchdog, said
on Thursday there is no single fix. 
    "I don't think there is a one-size-fits-all solution," Geale
told the Westminster Business Forum.
    Consumer credit, including unarranged overdrafts, were a
lifeline for some people, he said. 
    "Price caps are something that shouldn't be used in haste
... There is a combination of factors that we need to consider,
and not just a price cap," Geale said.
    Rising costs for households in an era of weak wage growth --
whether from loans, housing or energy -- have shot to the top of
Britain's political agenda over the past few years.
    Earlier on Thursday, Britain published a draft law that
would cap consumer gas and electricity prices for millions of
households, taking action to try and fix a market it says
punishes loyal customers.             

 (Editing by Catherine Evans)
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